Insight On External Commercial Borrowing (ECB)
March 6, 2013
External Commercial Borrowings (ECB) is an instrument used in India to facilitate the access to foreign money by Indian Corporates. ECB refer to commercial loans in the form of bank loans, buyers’ credit, suppliers’ credit, securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares) availed of from non-resident lenders with a minimum average maturity of 3 years.
The brief RBI regulations relating to ECB are detailed below:
Eligible Borrowers |
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The following types of proposals for ECB are covered under the Approval Route.
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Amount and Maturity |
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Eligible borrowers under the automatic route other than corporates in the services sector viz. hotel, hospital and software can avail of ECB beyond USD 750 million or equivalent per financial year. Corporates in the services sector viz. Hotels, hospitals and software sector are allowed to avail of ECB beyond USD 200 million or its equivalent in a financial year for meeting foreign currency and/or Rupee capital expenditure for permissible end-uses. The proceeds of the ECBs should not be used for acquisition of land. Indian companies which are in the infrastructure sector, as defined under the extant ECB guidelines, can avail of ECBs in Renminbi (RMB), subject to an annual ceiling of USD one billion for the entire sector, pending further review. |
All in Cost Ceiling | All-in-cost includes rate of interest, other fees and expenses in foreign currency except commitment fee, pre-payment fee, and fees payable in Indian Rupees. The payment of withholding tax in Indian Rupees is excluded for calculating the all-in-cost. The all-in-cost ceilings for ECB are reviewed from time to time. | All-in-cost includes rate of interest, other fees and expenses in foreign currency except commitment fee, pre-payment fee, and fees payable in Indian Rupees. The payment of withholding tax in Indian Rupees is excluded for calculating the all-in-cost. The all-in-cost ceilings for ECB are reviewed from time to time. |
End Use permitted |
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Not Permitted Use |
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Recognised Lenders | Borrowers can raise ECB from internationally recognised sources such as
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