The government has modified the policy on external commercial borrowings (ECB)
in its bid to stem the rising flow of funds. Under the revised norms, ECBs above
$20 million per company would be permitted only for foreign currency expenditure
for permissible end-uses of ECB.
raising ECB over $20 million will have to park the ECB proceeds overseas for use
as foreign currency expenditure for permissible end-uses. The rules would be applicable
to ECB exceeding $20 million per financial year both under the automatic route
and under the approval route.
up to $20 million would be permitted for foreign currency expenditure on permissible
end-uses under the automatic route and these funds shall be parked overseas and
not remitted to India.
proposing to avail ECB up to $20 million for rupee expenditure for permissible
end-uses would require prior approval of the Reserve Bank of India under the approval
route. However, such funds shall continue to be parked overseas until actual requirement
other aspects of ECB policy such as $500 million limit per company per year under
the automatic route, eligible borrower, recognised lender, average maturity period,
all-in-cost-ceiling, prepayment, refinancing of existing ECB and reporting arrangements
conditions will not apply to borrowers who have already entered into loan agreement
and obtained loan registration numbers from the Reserve Bank. Borrowers who have
taken verifiable and effective steps wherein the loan agreement has been entered
into to avail of ECB in the previous dispensation, and not obtained the loan registration
number may apply to the Reserve Bank through their authorised dealer.
above amendment in ECB policy will come into force with immediate effect.
government in consultation with the RBI is constantly reviewing the external commercial
borrowing (ECB) policy to keep it in tune with the evolving macroeconomic situation,
changing market conditions, sectoral requirements, the external sector and the
lessons of experience.