The Department of Telecom has slashed the performance and financial bank guarantee requirements of telecom operators by 80 per cent, which will improve the cash reserves of Vodafone Idea and other operators.

The amendment has been made in old telecom licences in the UASL (Unified Access Services licensee) category and new licences that were started in 2012 — the unified licence (UL) category.

Under the amended norms in UL, the operators will be required to provide a performance bank guarantee (PBG) of up to Rs 44 crore for each service for the telecom licence compared with Rs 220 crore under the old rule.

They will have to give a financial bank guarantee (FBG) of maximum Rs 8.8 crore per circle now, against the previous requirement of Rs 44 crore.

The rule will not be applicable in cases where bank guarantees (BG) have been furnished because of any court order or are subject to any litigation, the licence amendment note said.

In UASL, there were three different amounts of financial bank guarantees that were charged — Rs 50 crore for each A category telecom circle, Rs 25 crore for B service area and Rs 5 crore for C category circles — that has been reduced to 20 per cent through the amendment, which has been issued with immediate effect.

“The PBGs and FBGs of existing licensees shall be revised to 20 per cent of the current total amount held by the licensor...,” the amendment note for UASL said.

The new rules will not apply to telecom operators, who are currently going through the liquidation process.

“Through the amendment in license agreements, telecom service providers will be eased off the huge burdens of bank guarantees and will enable the availability of more funding for the expansion of the telecom network,” S.P. Kochhar, the director-general of the Cellular Operators Association of India said.

Telecom FDI

The government on Wednesday notified its decision to permit 100 per cent foreign direct investment (FDI) under automatic route in the telecom services sector. In a press note, it said foreign investment in telecom services will be subject to the condition of Press Note 3 of 2020.