MANU/APDR/0011/2005
Department / Board:RBI APDIR(Series)
Circular No.:
A.P.(DIR Series) Circular No. 5
Date:
01.08.2005
External Commercial Borrowings (ECB)
Attention of Authorised Dealers is invited to the A.P.
(DIR Series) Circular No.40 dated April 25, 2005
and A.P.
(DIR Series) Circular No.60 dated January 31, 2004
in connection with External Commercial Borrowings (ECB). A review of the ECB
guidelines has been undertaken keeping in view the current macroeconomic
situation, the experience gained so far by the Reserve Bank in administering the
ECB policy and requests received from certain sectors.
2. Accordingly, it has been decided tto liberalise/modify the ECB hat NGOs
engaged in micro finance activities may be permitted to raise ECB up to USD 5
million during a financial year for permitted end-use, under Automatic Route.
Detailed guidelines on ECB for micro finance activities with necessary
safeguards are set out below.
3. The concerns emanating from ECB for NGOs engaged in micro finance
activities can be categorized in to four types: (i) whether the borrower is
genuine. (ii) whether ECB funds are utilised for genuine purpose, (iii)
credentials of the overseas lender of ECB and (iv) systemic implications of such
ECB flows including the risks of foreign currency borrowing by such entities.
The following framework addresses these issues. policy as indicated below:
i. ECB with minimum average maturity of 5 years by non-banking financial
companies (NBFCs) from multilateral financial institutions, reputable regional
financial institutions, official export credit agencies and international banks
to finance import of infrastructure equipment for leasing to infrastructure
projects would be considered by the Reserve Bank under the Approval Route;
ii. Foreign Currency Convertible Bonds (FCCB) by housing finance companies
satisfying specific criteria would be considered by the Reserve Bank under the
Approval Route;
iii. Minimum holding of equity by the foreign equity holder in the borrowers
company (which would qualify the foreign equity holder as a recognised lender
for ECB) has been clarified;
iv. Prepayment of ECB up to USD 200 million (as against the existing limit up
to USD 100 million) may be allowed by Authorised Dealers without prior approval
of RBI subject to compliance of applicable minimum average maturity period for
the loan. Pre-payment of ECB for amounts exceeding USD 200 million would be
considered by the Reserve Bank under the Approval Route.
v. Currently, domestic rupee denominated structured obligations are permitted
by the Government of India to be credit enhanced by international
banks/international financial institutions/joint venture partners. Such
applications would henceforth be considered by the Reserve Bank under the
Approval Route.
3. The amended ECB policy will come into force with immediate effect and is
subject to review.
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