India slashes bank guarantee for telecoms by 80 percent

India government has reduced the performance and financial bank guarantee (FBG) requirement of telecom service providers (TSPs) by 80 percent.
The move will unblock the cash telecom operators keep with banks to furnish BGs. BSNL, MTNL, Reliance Jio, Vodafone Idea and Bharti Airtel will benefit from the development. Most of the Indian telecoms are struggling at present.

India government said SPs will be required to provide a performance bank guarantee of up to Rs 44 crore for each service for the telecom licence, according to the amended norms, compared to Rs 220 crore under the earlier rule.

Similarly, telecom operators will need to provide a financial bank guarantee of maximum Rs 8.8 crore per circle against Rs 44 crore previously.

The rule will not be applicable in cases where the BG has been furnished on a court order or subject to any litigation, the DoT note said. Rules will not apply to telecom operators going through the liquidation process.

BG submitted in respect of securitisation of deferred spectrum installments, including performance bank guarantees, will continue to be held by licensor without any reduction.

Meanwhile, India government notified its decision to permit 100 percent foreign direct investment (FDI) under the automatic route in the telecom services sector subject to certain conditions.

Till now, only 49 per cent of FDI was allowed through the automatic route and anything beyond that had to come via the government route. Telcos, including infrastructure providers, will be covered under the new FDI regime.