External Commercial Borrowings (ECB) Policy - August 2007

The External Commercial Borrowing (ECB) policy is constantly reviewed by the Government in consultation with Reserve Bank of India (RBI) to keep it in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and the lessons of experience. Based on such review, government has decided on 7th August 2007 to modulate the capital inflows through ECB by modifying some aspects of the policyas indicted below: (i) Henceforth, ECB more than USD 20 million per borrowing company would be permitted only for foreign currency expenditure for permissible end-uses of ECB. Accordingly, borrowers raising ECB more than USD 20 million shall park the ECB proceeds overseas for use as foreign currency expenditure for permissible end-uses. The above modifications would be applicable to ECB exceeding USD 20 million per financial year both under the Automatic Route and under the Approval Route. (ii) ECB up to USD 20 million per borrowing company would be permitted for foreign currency expenditure for permissible end-uses under the Automatic Route and these funds shall be parked overseas and not remitted to India. Borrowers proposing to avail ECB up to USD 20 million for rupee expenditure for permissible end-uses would require prior approval of the Reserve Bank under the Approval Route. However, such funds shall be continued to be parked overseas until actual requirement in India. (iii) All other aspects of ECB policy such as USD 500 million limit per company per year under the Automatic Route, eligible borrower, recognised lender, average maturity period, all-in-cost-ceiling, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged. (iv) These conditions will not apply to borrowers who have already entered into loan agreement and obtained loan registration numbers from the Reserve Bank. Borrowers who have taken verifiable and effective steps wherein the loan agreement has been entered into to avail of ECB in the previous dispensation, and not obtained the loan registration number, may apply to the Reserve Bank through their Authorised Dealer. (v) The above amendment in ECB policy will come into force with immediate effect