Ahead of the 3G spectrum auction, the Reserve Bank of India (RBI) has allowed telecom companies to use the funds raised through external commercial borrowing (ECB) for buying 3G spectrum.

Accessing ECB funds to participate in the auction has been the long-standing demand of telcom companies. The RBI also reimposed its all-inclusive interest ceiling for ECBs under the approval route of 300 basis points above Libor, the benchmark for global borrowings and lendings, for loans with a tenor of three to five years. The all-inclusive ceiling for loans with a maturity period of more than five years will be 500 basis points. Last year, the RBI had done away with the ceiling to help companies cope with the global credit crunch.