External Commercial Borrowings (ECB)
The Reserve Bank of India (RBI) has issued a Master Circular on External Commercial Borrowings and Trade Credits, outlining the guidelines for ECBs.
Automatic Route:
Eligible borrowers can access ECBs under the automatic route, subject to certain conditions.
- Recognised lenders include banks, financial institutions, and foreign equity holders.
- The amount and maturity of the ECB are subject to ceilings.
- The all-in-cost ceiling is 300 basis points over the six-month LIBOR.
- ECBs can be used for various end-uses, including capital expenditure, working capital, and refinancing of existing debt.
- Relaxations are available for successful bidders of 2G spectrum re-auction.
- Certain end-uses, such as real estate and investment in capital markets, are not permitted.
- Guarantees and security may be required.
- ECB proceeds can be parked abroad until utilisation.
- Prepayment and refinancing of existing ECBs are allowed.
- Debt servicing is permitted.
- Corporates under investigation are not eligible.
- A specific procedure must be followed for ECBs under the automatic route.
Approval Route:
ECBs that do not meet the automatic route criteria require approval from the RBI.
The approval route has similar guidelines to the automatic route, with some variations.
Chat with the Master Circular:
Download: Master Circular on External Commercial Borrowings and Trade Credits