External Commercial Borrowing (ECB)

Rakesh Ramchandran (X-MBA 23)

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Borrowing GuidelinesForeign Exchange Management Act (FEMA) Guidelines

For Borrowing

External Commercial

Borrowing (ECB)

Foreign Currency Convertible

Bonds (FCCBs)

Preference Shares

Foreign Currency Exchangeable Bonds (FCEB)

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External Commercial Borrowing (ECB)

ECB is an instrument used in India to facilitate the access to foreign money by Indian corporations and PSUs (public sector undertakings)

Its a source of funds for financing expansion of existing capacity and for fresh investment out of territory

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Ways of raising ECB

Automatic Route• Does not

require RBI approval

Approval Route• Approval

required from RBI

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Automatic Route

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Borrowers

Corporate including hotel, hospital and software sector

Infrastructure Finance companies (IFCs)

Units in SEZ zones

NGO involved in Micro finance

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Limits for Raising ECBCategory Amount (USD) per

unit /per financial year

Corporate other than those in service sector (i.e. hotel, hospital and software)

Up to 750 M or equivalent

Corporate in service sector (ECB not applicable for Land acquisition)

Up to 200 M or equivalent

NGO engaged in Micro Finance

Up to 10 M or equivalent (Forex exposure to be fully hedged)

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Approval Route

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Eligible Borrowers (1)

Foreign Investors deleing with Infrastructure and export finance such as EXIM bank

Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Government.

ECB with minimum average maturity of 5 years by NBFC to finance import of infrastructure equipment for leasing to infrastructure projects.Infrastructure Finance Companies (IFCs) i.e. NBFCs, categorized as IFCs, by RBI (beyond 50% of their owned funds) for on-lending to the infrastructure sector as defined under the ECB policy and subject to compliance of certain stipulations.

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Eligible Borrowers (2)

Foreign Currency Convertible Bonds (FCCBs) by Housing Finance Companies.

Special Purpose Vehicles (SPV) or any other entity notified by the RBI, set up to finance infrastructure companies / projects exclusively.

Financially solvent ulti-State Co-operative Societies engaged in manufacturing.

SEZ developers for providing infrastructure facilities within SEZ.

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Eligible Borrowers (3)

Eligible Corporate under automatic route other than in the services sector i.e. hotels, hospitals and software sector can avail of ECB beyond USD 750 million per financial year.

Corporate in the service sector for availing ECB beyond USD 200 Mn. per financial year.

Cases falling outside the purview of the automatic route limits and maturity indicated, etc.

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Limits for Raising ECBCategory Amount (USD) per

unit /per financial year

Corporate other than those in service sector (i.e. hotel, hospital and software)

Beyond to 750 M or equivalent

Corporate in service sector (ECB not applicable for Land acquisition)

Beyond 200 M or equivalent

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Lenders and Permitted End Use

Automatic & Approval

Route Common Factors

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Recognized Lenders

International banks International capital markets

Multilateral financial institution (such as IFC, ADB, DCD etc)/ Regional Financial

Institution and Government owned Financial Institution

Export Credit Agencies

Supplier of Equipment

Foreign Collaborators

Foreign Equity Holders

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End use permitted (1)

Import of Capital goods

Executing new projects

Modernization/Expansion of existing units

Infrastructure projects for PWD works

Payment for Natural resources (like spectrum allocation)

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End use permitted (2)First and second stage acquisition of shares in disinvestment process under the Government’s disinvestment program of PSU shares

Overseas direct investment in Joint Ventures (JV)/ Wholly Owned Subsidiary (WOS)

Interest during Construction (IDC) for Indian companies in Infrastructure sector

Lending to NGO engaged in Micro finance activities

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Average Maturity on Amount Borrowed

Limits Minimum Average Maturity Period

Up to USD 20 M or its equivalent

3 years

Above USD 20 M and up to 750 M or equivalent

5 years

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Thank You