External Commercial Borrowings (ECB)
The Reserve Bank of India (RBI) has outlined guidelines for External Commercial Borrowings (ECB), which include:
Eligible Borrowers: Entities eligible to borrow under the automatic route include companies, partnership firms, and limited liability partnerships.
Recognised Lenders: Lenders recognized by the RBI include banks, financial institutions, and foreign equity holders.
Amount and Maturity: The minimum average maturity period is 3 years, and the maximum amount that can be borrowed is USD 750 million or equivalent.
All-in-cost Ceilings: The all-in-cost ceiling is 300 basis points over the 6-month LIBOR.
End-use: ECBs can be used for various purposes, including capital expenditure, working capital, and repayment of existing loans.
Payment for Spectrum Allocation: ECBs can be used to pay for spectrum allocation.
End-uses not permitted: ECBs cannot be used for real estate, investment in capital markets, or on-lending to other entities.
Guarantees: Guarantees can be issued by Indian banks, financial institutions, or foreign banks.
Security: Security can be created on immovable assets, movable assets, financial securities, or through corporate or personal guarantees.
Parking of ECB proceeds: ECB proceeds can be parked overseas or in India, but must be used for the intended purpose.
Prepayment: Prepayment of ECBs is allowed, subject to certain conditions.
Refinancing of an existing ECB: Refinancing of an existing ECB is allowed, subject to certain conditions.
Debt Servicing: Debt servicing must be done as per the agreed-upon terms.
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Download: Master Circular on External Commercial Borrowings and Trade Credits