External Commercial Borrowings
External Commercial Borrowings
External Commercial Borrowings – ECBs refer to commercial loans in the form of bank
loans, securitized instruments (e.g. floating rate notes and fixed rate bonds, non-
convertible, optionally convertible or partially convertible preference shares), buyers’ credit,
suppliers’ credit availed of from non-resident lenders with a minimum average maturity of 3
years.
Other debt instruments to which ECB guidelines applicable are given below
Foreign Currency Convertible Bonds (FCCBs) mean a bond issued by an Indian company
expressed in foreign currency, and the principal and interest in respect of which are
payable in foreign currency. The Bond gets converted into Ordinary Shares of the issuing
company either in whole or in Part at a pre-determined date based on equity related
warrants attached to the bond. The ECB policy is applicable to FCCBs.
Automatic Route
Borrowers can avail ECB under Automatic Route subject to meeting certain basic criteria
such as:***
1. Eligible Borrower, i.e. who can borrow
2. Recognised Lenders i.e. from whom ECB can be availed
3. Amount & Maturity (minimum average maturity)
4. All-in-Cost Ceilings (Maximum Servicing Cost of the loan)
5. Guarantee & Security
6. End Use
Accordingly, eligibility for an ECB in respect of eligible borrowers, recognized lenders, end-
uses, etc. have to be read in conjunction and not in isolation.
*** The above factors are captured under a tabular form in an Excel Sheet attached
herewith. Standard Customer request letter also enclosed.
All entities may avail ECBs’ as per the current norms, if they are otherwise eligible,
notwithstanding the pending investigations / adjudications / appeals, without
prejudice to the outcome of such investigations / adjudications / appeals.
Accordingly, in case of all applications where the borrowing entity has indicated
about the pending investigations / adjudications / appeals, Authorised Dealers
while approving the proposal shall intimate the concerned agencies by endorsing
the copy of the approval letter.
3. Guarantees: Bank from India can not issue any type of guarantee / letter of
comfort / LC / SBLC etc for availing ECB by the borrower
5. Parking of ECB proceeds: The proceeds of the ECB raised abroad meant for Rupee
expenditure in India, should be repatriated immediately for credit to the borrowers'
Rupee accounts with AD Category I banks in India. The rupee funds, however, will not
be permitted to be used for investment in capital markets, real estate or for inter-
corporate lending.
o ECB proceeds meant only for foreign currency expenditure can
be retained abroad pending utilization.
6. Prepayment: Prepayment of ECB up to USD 500 million may be allowed by AD banks
without prior approval of Reserve Bank subject to compliance with the stipulated
minimum average maturity period as applicable to the loan.
7. Refinancing of an existing ECB: The existing ECB may be refinanced by raising a
fresh ECB subject to the condition that the fresh ECB is raised at a lower all-in-cost and
the outstanding maturity of the original ECB is maintained.
8. Debt Servicing: The designated AD bank has the general permission to make
remittances of installment of principal, interest and other charges in conformity with
the ECB guidelines issued by Government / Reserve Bank of India from time to time.
9. Method of calculation of Average Maturity:
ABC LTD.______________________________________
Product
No. of
Date of = (Col.4
Days**
drawal / Repay- * Col. 5)
Drawal Balance balance
repayment ment / (Loan
with the
(MM/DD/YYYY) amount
borrower
* 360)
For More information on Approval Route, please refer to Master circular &
relevant AP-DIR series circulars.
11. Other Aspects of ECB
o Structured Obligations
o Take-out Finance
o Conversion of ECB into Equity
o Crystallisation of ECB
o ECB under the erstwhile 5 Million Scheme
For More information on the above aspects, please refer to Master circular &
relevant AP-DIR series circulars.
12. Reporting Arangements and Dissemination of Information
i) Reporting Arrangements (to RBI):
a. With a view to simplifying the procedure, submission of copy of loan
agreement to RBI is dispensed with.
b. For allotment of Loan Registration Number (LRN), borrowers are required
to submit
o Form 83, in duplicate, certified by the Company Secretary (CS) or
Chartered Accountant (CA) to the designated AD bank. One copy is to
be forwarded by the designated AD bank to the Director, Balance of
Payments Statistics Division, Department of Statistics and Information
Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex,
Mumbai - 400 051
o Note: copies of loan agreement and offer documents for FCCB are not
required to be submitted with Form 83
c. The borrower can draw-down the loan only after obtaining the LRN from
DSIM, Reserve Bank.
d. Borrowers are required to submit ECB-2 Return certified by the
designated AD bank on monthly basis so as to reach DSIM, Reserve Bank
within seven working days from the close of month to which it relates.
Note: All previous returns relating to ECB viz. ECB 3 - ECB 6 have been
discontinued with effect from January 31, 2004].