External Commercial Borrowings ‑ Meaning of

External Commercial Borrowings (ECBs) means borrowing in foreign exchange by a person resident in India. ECB includes commercial bank loans, buyer's credit, supplier's credit, securitised instruments such as Floating Rate Notes and Fixed Rate Bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, loan from foreign collaborator/equity holder, etc.

ECBs are permitted by the Government as a source of finance to Indian Corporate for expansion of existing capacity as well as for fresh investment

Govt. Policy on ECB

The Government had last issued guidelines on policies and procedure for ECB in July 1999. Further modifications have been issued in February June and September 2000, in July and September 2002 and in November 2003 (text given later). The Govt. policy stipulates certain ceilings on access to ECB, consistent with prudent debt management while giving greater priority for sectors of infrastructural importance.

FEMA Regulations

To regulate borrowing in foreign exchange by a person resident in India the Reserve Bank of India has framed Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000. The Reserve Bank has also issued various directions on raising of ECBs, short term credit and loans from close relatives outside India. Text of the regulations and the directions are given later.

Persons Eligible to raise ECB

Any person resident in India including any corporate being a legal entity registered under the Companies Act/Societies Registration Act/Co‑operative Societies Act/proprietorship /partnership concerns, holding Companies Promoters, may raise ECB.

However, only those co‑operative societies which are commercial in nature and whose books of accounts are upto date and have complied with the statutory audit provisions without any qualifications would be eligible to raise ECBs.

Trusts/non‑profit making organisations shall not be eligible to raise ECBs. Financial intermediaries such as bank, DFI or NBFC shall not be eligible to raise ECBs.

Sources of ECB

Borrowers may raise ECB from any internationally recognised source such as overseas banks, export credit agencies, suppliers of equipment, foreign collaborators, foreign equity‑holders, NRI, OCB, corporate/institution with a good credit rating from internationally recognised credit rating agency, or from international capital markets. The lenders should be recognised and registered in the host countries for the purpose of extending international finance.

Borrowings from unrecognised sources are not permitted.

Further, the loan should be organised through a reputed merchant banker registered with the regulatory authorities of the host Country viz. USA, Japan, EU countries, Singapore and such other countries as may be notified from time to time by the Government.

Purposes for which ECB can he raised

ECB proceeds can be utilised for any commercial purpose except for investment in stock market.

External commercial loans may be utilised for import of capital goods and services (on FOB or CIF basis) and for project related expenditure in all sectors subject to following conditions

a) ECB raised for project‑related rupee expenditure must be brought into the country immediately.

b) ECB raised for import of capital goods and services should be utilised at the earliest and corporate should strictly comply with RBI's extant guidelines on parking ECBs outside till actual imports. RBI shall monitor ECB proceeds parked outside.

Restrictions relating to end‑use have been tightened with the approval for ECBs over US $ 50 million to be allowed only for-

a) financing import of equipment,

b) meeting foreign exchange requirements of infrastructures projects (viz. projects in sectors of power, telecommunication, railways, road including bridges, ports, industrial parks, urban infrastructure ‑ water supply, sanitation and sewage projects)

In other words, ECBs for other purposes shall be restricted to a ceiling of US $ 50 million.

ECB proceeds may be retained abroad in a bank account for meeting future forex requirements, subject to specified conditions.¹

Corporate borrowers may raise ECB to acquire ships/vessels from Indian shipyards.

The restriction on use of ECB proceeds for investment in real estate sector has now been lifted.²

Under no circumstances, ECB proceeds will be utilized for investment in stock market. However, ECB proceeds may be used in the first stage acquisition of shares in the disinvestment process of PSUs (because technically speaking it is not a prohibited end‑use of ECB, being a non‑stock exchange transaction) and also in the mandatory second stage offer to the public in view of their strategic importance.³

Period for which ECB can be raised

ECBs can be raised with minimum average maturity as under

Minimum Average Maturity

ECB upto USD 20 m during a financial year, in all sectors except 100% E0Us

ECB greater than US D 20 m during a financial year in all sectors except 100% E0Us

ECB in 100% E0Us

ECB in SEZ units upto USD 500 m during a year

Three years

Five years

Three years

No Restriction2

Note : The 'average maturity' is the weighted average of all disbursements taking each disbursement individually and its period of retention by the borrower .⁴

Bonds and Floating Rate Notes (FRNs) can be raised in trances of different maturities provided the average maturities of different trances within the same overall approval taken together satisfies the prescribed maturity criteria. In such cases, normally longer term borrowings would precede the shorter tenors. The longer the initial tenor the shorter the subsequent trances can be within the average maturity.

Modes of Raising ECB

External Commercial Borrowings may be raised under different modes. These are :

i. Commercial Bank Loans : ECB may be raised in the form of term loans from banks outside India. Such loans carrying fixed rate of interest, are normally arranged for a period up to 8 years and are priced at a specific spread above the going rate in the concerned country of the chosen currency.

ii. Buyer's Credit : Under buyer's credit scheme a buyer obtains credit from a bank or other financial institution in the supplier's country to make payment to the supplier for the goods supplied. The supplier receives payment for the exports on his delivering to the lending agency the requisite documents specified in the loan agreement and the relative commercial contract. The lending bank/institution realises payment from the buyer (importer) in instalments as and when they fall due.

iii. Supplier's Credit : Supplier's credit is extended to the supplier (exporter) by the financial institutions (in the exporter country) to finance his deferred receivables. The buyer is required to provide the requisite guarantee from an acceptable bank or financial institution in the importer country.

Credit may also be extended by the supplier (exporter) directly to his buyer (importer) on deferred payment terms against his providing a guarantee as above. In this case, the supplier will realise the proceeds of his exports by discounting the bills of exchange (drawn on and accepted by the buyer) with his banker or the designated Government agency in his country. The supplier, however, still continues to be liable to his banker should the buyer fail to pay because it is basically a credit extended by the ' supplier to the buyer. Such credits, however, are not really supplier's credit in the technical sense. These are in the nature of trade credit.

Supplier's Credit Vs. Buyer's Credit: Both supplier's credit and buyer's credit are extended by the lending agency in the exporter's country; when it is granted to the supplier (exporter) it is a supplier's credit and when it is granted to the buyer (importer) it is a buyer's credit.

iv. Securities Instruments : ECBs may be raised through securitised instruments such as Floating Rate Notes (FRNs), Fixed Rate Bonds (FRBs), Syndicated Loans etc.

Fixed Rate Bonds are bonds carrying a fixed rate of interest.

Floating Rate Notes are bonds without a fixed rate of interest, the coupon being set periodically according to a predetermined formula typically tied to a short‑term interest rate in an appropriate market.

Large size foreign currency loans are often given by syndicates (or consortium) of banks, thus, called syndicated loans. Consortium banks are, in fact, a sort of risk‑taking partnership amongst themselves. The participating banks (in such syndicates) may be quite large in number helping distribution of the risks in foreign currency transactions to as many as possible. The consortium functions as an independent entity but with the participating banks' prescribed objectives.

v. Besides above, ECB can also be raised in the form of credit from export credit agencies and borrowings from multilateral financial institutions such as International Finance Corporation (Washington) ADB, AFIC, CDC, etc., and foreign collaborators, foreign equity holders, corporate/institutions with a good credit rating from internationally recognised credit rating agency.

Types of ECBs

External Commercial Borrowings (ECBs) can be categorised as under:

Borrowings from a Bank situated outside India

A person resident in India may borrow from a bank situated outside India, by way of loan or overdraft or any other credit facility, for the following purposes :

a) for execution outside India of a turnkey project, or

b) for execution outside India of a civil construction contract, or

c) in connection with exports on deferred payment terms.

The above borrowings can be raised only when all the terms and condition stipulated by the authority which has granted the approval to the project o contract and in case of exports the provisions of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 are complied with.

Liability of the Borrower : The borrower should file quarterly return in Form ECB 2 ¹ to the concerned Regional Office of the Reserve Bank of India:

Borrowing by an Importer in India

Borrowings by an importer in India can be classified as under:

(A) Supplier's Credit i.e. Borrowings by an importer in India from overseas supplier of goods. This can be further classified into two categories

(a) Supplier's credit for a period not exceeding six months : A importer in India can avail of foreign currency credit, provide the following conditions are satisfied:

i. The credit facility is being availed of only for import o goods.

ii. The credit facility is extended by the overseas supplier.

iii. The credit facility is for a period not exceeding six months

iv. The import is in compliance with the Export Import Policy of the Government of India in force.

Liability of the Borrower : The borrower should file quarterly return in Form ECB 2¹ and shall also furnish a statement o drawls, utilisation, repayment and out standings in Form ECB 5² to the concerned Regional Office of the Reserve Ban of India.

(b) Supplier's Credit for more than six months but less than three years¹ . An importer may avail foreign currency credit which fulfils the following conditions :

i. the credit is extended by the overseas supplier of goods;

ii. the credit is extended to an importer of goods for importing goods in India, and

iii. the period of maturity of credit is more than six months but less than three years.

(B) Buyer's credit for less than three years¹ : An importer may avail foreign currency credit which fulfils the following conditions :

i. the foreign currency loan/credit is extended to an importer in India for financing imports into India;

ii. the credit is extended by any bank or financial institution outside India, and

iii. the period of maturity of loan/credit is less than three years.

Limits for Borrowings under ECB Schemes

1) An Indian entity may raise borrowings in foreign exchange for corporate purposes at a simple minimum maturity of three years. The loan amount may be raised in one or 'more trances provided the total outstanding loan under this scheme at any point of time does not exceed USD 5 million. Each tranches should have a minimum simple maturity of 3 years.

2) An Indian entity may raise borrowings in foreign exchange for following purposes-

(i) For Financing Infrastructure Projects: Holding companies/promoters will be permitted to raise ECB up to a maximum of USD 200 million ² equivalent to finance equity investment in a subsidiary/ joint venture company implementing infrastructure projects. This flexibility has been given to enable investors in infrastructure projects to meet the maximum domestic equity requirements.

In case the debt is to be raised by more than one promoter for a single project then the total quantum of loan by all promoters put together should not exceed USD 200 million.

Besides, foreign currency loans may be raised by an Indian entity for financing infrastructure projects, provided that the minimum average maturity of loan is not less than three years.

For the purposes of ECB, power, telecommunication, railways, roads including bridges, ports, industrial parks, urban infrastructure i.e. water supply, sanitation and sewage projects shall qualify as infrastructure sectors.³

(ii) Borrowings by Exporters/Foreign Exchange Earners : Exporter and other foreign exchange earners may raise ECB upto thrice the average amount of annual exports during the previous three year subject to a maximum of USD 200 million for general corporate purposes. The minimum average maturity will be 3 years upto USD 20 million equivalent and 5 years for ECBs exceeding USD 20 million. The maximum level of entitlement in any one year is a cumulative limit and shall include earlier debt outstanding.

(iii) Long‑term Borrowings : Borrowings for general corporate purpose may be raised with average maturity of 8 years and above, with prior approval of Government/RBI, up to the extent of :

(a) USD 200 million if the average maturity is 8 years and above but less than 16 years,

(b) USD 400 million if the average maturity is 16 years and above The long‑term debt instrument should not include any 'put' or 'call options potentially reducing the stated maturities. Such borrowing may be raised either through issue of Floating Rate Notes/Fixed Rat Bonds or Syndicated Loan, etc. Project appraisal report is no necessary for such borrowings subject to the limits stated above.

Borrowings by Special Economic Zone Units

Units in Special Economic Zones (SEZs) may raise ECBs without an maturity restriction but through recognised banking channels, up to an annual ceiling of USE) 500 million. Such borrowings should be raised strictly on, stand alone basis', that is, the SEZ unit would be completely isolated from financial contacts with their subsidiaries or their parent in the mainland or within the SEZ as far as repayment of ECB interest/principal is concerned Thus, in effect only those SEZ units which are either subsidiary/branch of company registered outside India or where a company is registered independently for operating unit(s) in SEZ(s), would qualify for stand alone criteria. The loan (principal + interest + other fee, charge, etc.) shall be repaid out of proceeds generated by the SEZ unit.

Units in SEZs may raise ECBs, subject to following further conditions

a) ECB is for own requirement of SEZ unit,

b) the unit shall not on‑lend any part of ECB to its sister concern or other DTA units.

Procedure for Raising ECB

Fresh ECBs for an amount up to US $ 50 million and all refinancing of, existing ECB have been placed under automatic route. No approval from Ministry of Finance or Reserve Bank of India shall be required. Indian corporate shall submit application with the loan agreement to their authorised dealer. They shall however, be required to furnish the quarterly returns.

ECBs up to US $ 100 million under all windows shall be sanctioned by the Reserve Bank of India. Corporate borrowers shall submit their applications to Exchange Control Department of RBI, Central Office, ECB Division Mumbai.

ECBs for an amount more than US $ 100 million and under structured obligations may be submitted by the borrowers to the Jt. Secretary (ECB), Department of Economic Affairs, Ministry of Finance, North Block, New Delhi.

Procedure for Raising ECB under Automatic Route¹

A External Commercial Borrowings can be raised under the automatic route and no prior approval from the Ministry of Finance/Reserve Bank is required for raising ECB under the following circumstances :

(i) The maximum amount which can be raised under the automatic route in the case of fresh ECB is US$ 50 million.

(ii) The average maturity of fresh ECB should not be less than 3 years.²

(iii) All refinancing of existing ECB can be done through the automatic route.

(iv) The borrowings must be in compliance with both the ECB guidelines framed by the Ministry of Finance, Government of India, and the regulations/directions/circulars issued by the Reserve Bank in this regard

(v) Only eligible persons can raise ECB under the automatic route.

(vi) It is the responsibility of the corporates to ensure that they raise ECB from an internationally acceptable and/or recognised lender, such as export credit agencies, suppliers of equipments, foreign collaborators, foreign equity holders, international capital markets, reputed international banks and financial institutions etc.

(vii) The loan should be organised through a reputed merchant banker registered with the regulatory authorities of the host country.

(viii) The lenders should be recognised and registered in the host countries for the purpose of extending international finance.

In the opinion of the Board of Editors, the requirement of clause (vii) and (viii) above should not be applicable when the ECB is raised from the foreign collaborator or foreign equity holder.

(ix) Corporates are also permitted to make necessary draw downs under the automatic route without prior permission from the Reserve Bank.

(x) Opening of foreign currency account for parking ECB proceeds temporarily, pending utilisation, will require prior approval of the concerned Regional Office of Reserve Bank.¹

B Procedure for ECB under Automatic Route

(i) The borrower should enter into an agreement with the lender.

(ii) The loan agreement should be signed both by the lender and the borrower.

(iii) Three copies of the loan agreement duly signed by both the parties should be submitted by the corporates through an authorised dealer of its choice, to the concerned Regional Office of the Reserve Bank.

(iv) The Regional Office of the Reserve Bank, sometimes, also requires information to be furnished in form 83 in duplicate.

(v) The Regional Office of the Reserve Bank would acknowledge receipt of the copies of the agreement and take the same on record.

(vi) The Regional Office of the RBI will also allot a loan identification number to such an agreement and communicates it to the borrower.

C. Liabilities of the Borrower under Automatic Route

(i) The primary responsibility to ensure that ECI3s raised are in conformity with the ECB guidelines and the Reserve Bank regulations/directions/circulars will be that of the concerned corporate/borrower.

(ii) It has been clarified by the RBI that if, at a later stage, any violation is found appropriate action will be taken by RBI under the Foreign Exchange Management Act, 1999.

(iii) The Borrower should file quarterly returns in the prescribed format (Form ECB 2) to the concerned Regional Office of the Reserve Bank of India.

(iv) The borrower should also apply to the Ministry of Finance (Department of Revenue/Department of Economic Affairs), Government of India for withholding tax exemption in case he desires to make payment of interest to the lender without deduction of tax at source.

Procedure for Raising Other Foreign Currency Borrowings (not covered under Automatic Route)

The Government has delegated the ECB sanctioning power up to US $ 100 million under all windows to Reserve Bank of India.¹ Corporates and Institutions are advised to submit their applications to Exchange Control Department of RBI, Central Office, ECB Division, Mumbai. All applications to Reserve Bank of India for raising ECB should be made in Form ECB² . The borrower should also file quarterly details of actual transactions of Foreign Currency Loans in Form ECB 2 ³ (in duplicate) to the concerned Regional Office of RBI within 10 days of the close of the quarter.

ECB applications for more than US $ 100 million should be made to the Government of India. Such applications should be submitted in the prescribed form ⁴ to the Joint Secretary (ECB), Department of Economic Affairs, Ministry of Finance, North Block, New Delhi‑ 110 001.

The application should be accompanied by the following:

i. An offer letter from the lender giving the detailed terms and conditions;

ii. Copy of Project‑Appraisal Report from a recognised Financial Institution/Bank, if applicable;

iii. Copies of relevant documents and approvals from Central/State Governments, wherever applicable, such as FIPB, CCEA and SIA clearances, environmental clearance, techno‑economic clearance from Central Electricity Authority, valid licences from competent authorities, no objection certificate from Ministry of Surface Transport, evidence of exports/foreign exchange earnings from the statutory auditor based on the bankers realisation certificates, registration with RBI in case of NBFCs, approval for overseas investment from RBI, etc.

The borrower should file quarterly return in Form ECB 2 (in duplicate) to concerned Regional Office of RBI within 10 days from the close of the quarter giving details of actual transaction of ECB.

General Permission to Keep Funds with a Bank Outside India

In terms of Regulation 8(1) of FEM (Deposit) Regulations, 2000, the funds raised through External Commercial Borrowings (ECBs) or by issuing ADRs/CDRs, as per the applicable conditions, are allowed to be held in foreign currency accounts with a bank outside India, pending their utilisation or repatriation to India.⁵

GUIDELINES ON POLICIES AND PROCEDURES FOR

EXTERNAL COMMERCIAL BORROWINGS FOR 1999‑2000¹

I. ECB POLICY

1. External Commercial Borrowings (ECBs) are defined to include commercial bank loans, buyers' credit, suppliers' credit, securitised instruments such as Floating Rate Notes and Fixed Rate Bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of Multilateral Financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc.

2. ECB are being permitted by the Government as a source of finance for Indian Corporates ² for expansion of existing capacity as well as for fresh investment.

3. The policy seeks to keep an annual cap or ceiling on access to ECB, consistent with prudent debt management.

4. The policy also seeks to give greater priority for projects in the infrastructure and core sectors such as Power, Oil Exploration, Telecom, Railways, Roads & Bridges, Ports, Industrial Parks and Urban Infrastructure etc. and the export sector. Development Financial Institutions, through their sub‑lending against the ECB approvals are also expected to give priority to the needs of medium and small scale units.

5. Applicants will be free to raise ECB from any internationally recognised source such as banks, export credit agencies, suppliers of equipment, foreign collaborators, foreign equity‑holders, international capital markets etc. Offer from unrecognised sources will not be entertained.³

Average Maturities for ECB⁴

6. ECBs should have the following minimum average maturities:⁵

(a) Minimum average maturity of three years for external commercial borrowings equal to or less than USD 20 million⁶ equivalent in respect of all sectors except 100% EOUs;

(b) Minimum average maturity of five years for external commercial borrowings greater than USD 20 million⁶ equivalent in respect of all sectors except 100% EOUs;

(d) Bonds and FRNs can be raised in tranches of different maturities as long as the average maturity of the different tranches within the same overall approval taken together satisfies the maturity criteria prescribed in the ECB guidelines. In such cases, it is expected that longer-term borrowings would necessarily precede that of the shorter tenors. The longer the initial tenor the shorter the subsequent tranches can be within the average maturity.

USD 5 Million Scheme

7. All Corporates and Institutions are permitted to raise ECB upto USD 5 million equivalent at a minimum simple maturity of 3 years. Borrowers may utilise the proceeds under this window for general corporate objectives without any end‑use restrictions excluding investments in stock‑markets or in real estate. The loan amount may be raised in one or more tranches subject to the caveat that the total outstanding loan under this scheme at any point of time should not exceed USD 5 million. Each tranche should have a minimum simple maturity of 3 years.

As a measure of simplification and de‑regulation for the benefit of corporate and institutions, Government have delegated the sanctioning powers to Reserve Bank of India (RBI) under the scheme with effect from 15th December, 1996 and further delegation with effect from 1. 1. 1999.

Corporate and Institutions are advised to submit their applications under this scheme to the Exchange Control Department of RBI, Mumbai.

Exporters/Foreign Exchange Earners

8. Corporates who have foreign exchange earnings are permitted to raise ECB upto thrice the average amount of annual exports during the previous three years subject to a maximum of USD 200 million without end‑use restrictions, i.e. for general corporate objectives excluding investment in stock markets or in real estate. The minimum average maturity will be three years upto USD 20 million equivalent and five years for ECBs exceeding USD 20 million. The maximum level of entitlement in any one year is a cumulative limit and debt outstanding under earlier approvals (erstwhile USD 15 million exporters scheme and thereafter) will be netted out to determine annual eligibility.

Infrastructure Projects¹

9. Holding Companies/promoters will be permitted to raise ECII upto a maximum of USD 50 million² equivalent to finance equity investment in a subsidiary/joint venture company implementing infrastructure projects. This flexibility is being given in order to enable domestic investors in infrastructure projects to meet the maximum domestic equity requirements.

10. In case the debt is to be raised by more than one promoter for a single project then the total quantum of loan by all promoters put together should not exceed USD 50 million¹ .

Long‑Term Borrowers

11. (i) ECB of eight years maturity and above will be outside the ECB ceiling, though MOF/RBI's prior approval for such borrowings would continue to be necessary. The extent of debt under this window will be reviewed by the Government periodically.

(ii) Funds raised under this window will not be subject to end‑use restriction other than that relating to investment in real estate and stock market upto the extent of :

(a) USD 200 million if the maturity is 8 years and above but less than 16 years.

(b) USD 400 million if the average maturity is 16 years & above.

(iii) Amounts raised above the limit at ii(a) and (b) will be subject to the normal end‑conditions prescribed under the general ECB guidelines.

(iv) To be eligible for this purpose, the long‑term debt instrument should not include any "put" or "call" options potentially reducing the stated maturities.

(v) Development Financial Institutions may raise ECB under this window in addition to their normal annual allocation covered by the cap.

(vi) Borrowing under this long‑term window which are exempted from the cap are not eligible for the purpose of enhancing the maturity of shorter term borrowings prescribed under normal ECB window to reach the required average maturity. In case borrowings of 8 years maturity & above are to be used to lengthen the maturity of shorter term borrowings then the entire amount must be treated as within the cap.

(vii) Utilisation of the ECB approved earlier under the regular ECB cap will not be a limiting factor for considering proposals under the long term maturity window. However, additional borrowing under either of the window, i.e. regular or under long term maturity, is subject to utilisation of earlier approvals in the same window.

(viii) Corporates may raise these borrowings either through FRN/ Bond Issues/Syndicated Loan etc. as long as the maturity and the interest spread are maintained as per the guidelines.

(xi) Project appraisal report is not necessary if funds are raised under the long‑term maturity window to be utilised for general corporate objectives subject to the limits prescribed at para (ii) above.

On‑lending by DFIs and other Financial Intermediaries¹

12. While DFIs are required to adhere to the average maturity criteria prescribed, namely, minimum of five years of loans more than USD 20 million equivalent and minimum three years for loans less than or equal to USD 20 million equivalent for their borrowing, they are permitted to on‑lend at different maturities. They may also on‑lend for project‑related Rupee expenditure. However, other financial intermediaries are required to adhere to the general ECB guidelines on maturity as well as end‑use in their on‑lending programmes.

13. All financial intermediaries, including DFIs, are required to on‑lend their external commercial borrowings within 12 months of drawdown.

14. To enable better utilisation of ECB by DFIs, it has been decided that DFIs would be permitted to on‑lend such Recycled Funds (available with them on account of time mismatch between repayment obligation of their sub-borrowers vis‑a‑vis those of DFIs to the offshore lenders), out of original ECBs only for import of capital goods and project‑related Rupee expenditure. Such Recycled Funds may not be on‑lend for the following purposes:

(i) Investment in Real Estate;

(ii) Investment in Stock markets including secondary market trading;

(iii) Working Capital purposes;

(iv) General Corporate purposes.

End‑use requirements

15. (A) External commercial loans are to be utilised for import of capital goods and services (on FOB or CIF basis) and for project related expenditure in all sectors subject to following conditions :

(a) ECB raised for project‑related rupee expenditure must be brought into the country immediately.

(b) ECB raised for import of capital goods and services should be utilised at the earliest and corporates should strictly comply with RIB's extant guidelines on parking ECBs outside till actual imports² . RBI would be monitoring ECB proceeds parked outside.

(B) Corporate borrowers will be permitted to raise ECB to acquire ships vessels from Indian shipyards.

(i) Investment in stock market; and

(ii) Speculation in real estate.

Proceeds from Bonds, FRNs and Syndicated Loan

16. Corporate borrowers who have raised ECB for import of capital good and services through Bonds/FRN/Syndicated loans are permitted to remit funds into India. The funds can be utilised for activities as per their business judgment except investment in stock market or in real estate, for upto one year or till the actual import of capital goods and services takes place whichever is earlier. In case borrowers decide to deploy the funds abroad till the approved end‑use requirement arises, they can do so as per the RBI's extant guidelines. RBI guidelines would have to be strictly adhered to. RBI would be monitoring ECB proceeds parked outside.

Sanction of additional ECB to the Company would be considered only after the company has certified, that it has utilized the amount for the purpose(s) they were raised.

ECO entitlement for new projects

17. All infrastructure and green field projects will be permitted to avail ECB to an extent of 35 per cent of the total project cost, as appraised by a recognised Financial Institution/Bank, subject to the fulfilment of other ECB guidelines However, ECB limits for telecom projects are more flexible and an increase from the present 35 per cent to 50 per cent of the project cost (including the licence fee) will be allowed as a matter of course. Greater flexibility may also be allowed in case of power projects and other infrastructure projects based on merits² .

Interest rate for project financing

18. At present, interest rate limits on ECB for project financing (i.e. to say non‑recourse financing) allow interest spreads above LIBOR/US Treasury to be higher than for normal ECB ³ . Keeping market conditions in mind, some flexibility will be permitted in determining the spread on merits. In order to give borrowers greater flexibility in designing a debt strategy, upto 50‑percent of the permissible debt may be allowed in the form of subordinated debt at a higher interest rate, provided the composite spread for senior and subordinated debt taken together comes within the overall project financing limit.

Structured Obligations¹

19. In order to enable corporates to hedge exchange rate risks and raise resources domestically, domestic rupee denominated structured obligations would be permitted to he credit enhanced by international banks/international financial institutions/joint venture partners subject to following conditions :

(a) In the event of default, foreign banks giving guarantee will make payment of defaulted amount of principal and interest after bringing in the equivalent amount of foreign exchange into the country.

(b) FERA clearance should be obtained from id in advance of issuance.

(d) In the event of default, the default should be foreign exchange equivalent amount equal to the principal and interest outstanding calculated in rupee terms.

(e) The liability of Indian company will always be rupee denominated and the debt servicing may be done in equivalent foreign exchange funds² .

(f) The guarantee fee/commission/charges and other incidental expenses to the Indian company should be in rupee terms only. All‑in‑cost on this account should not exceed 3% p.a. in rupee terms.

(g) In case of the proposals relating to sectors where conditions apply clearances e.g. relating to the assignability licences etc., these should be obtained in advance.

(h) In case of default, the interest rate could be coupon on the and/or 250 bps over prevailing secondary market yield of 5‑year GOI security, whichever is higher.

Other terms and conditions

20. Apart from the maturity and end‑use requirements as per para. above, the financial terms and conditions of each ECB proposal are required to be reasonable and market‑related. The choice of the sourcing of ECB currency of the loans, and the interest rate basis (i.e. floating or fixed), will be left to the borrowers.

Security

21. The choice of security to be provided to the lenders/suppliers will also be left to the borrowers. However, where the security is in the form of a guarantee from an Indian Financial Institution or from an Indian Scheduled Commercial, bank counter‑guarantee or confirmation of the guarantee by a Foreign Bark/Foreign Institution will not be permitted.

Exemption from with holding tax

22. Interest¹ payable by an industrial undertaking' in India, related t external commercial borrowings as approved by GOURBI would be eligible & tax exemptions as per section 10(15)(iv)(b), (d) to (g) of the Income‑tax Ac 1961. Exemptions under section 10(15)(iv)(b), (d) to (g) are gr4nted by Department of Economic Affairs while exemption under section 10(15)(iv)(c) is granted by Department of Revenue, Ministry of Finance.

Approval under FERA²

23. After receiving the approval from ECB Division, Department of Economic Affairs, Ministry of Finance, the applicant is required to obtain approval from the RBI under the Foreign Exchange Regulation Act, 1973 (FERA), and to submit a executed copy of the loan agreement Department for taking the same on record, before obtaining the clearance from RBI for drawing the loan. Monitoring of end-us of ECB will continue to be done by RBI.

24. At present. ECB approvals under USD 3 million scheme (enhanced to USD 5 million) is given by RBI and all other ECB proposals are processed in DEA. As a measure of further simplification and rationalisation, Government has decided to delegate the ECB sanctioning power to RBI up to USD 10 million under all the ECB schemes except structured obligation which is at present being administered by DEA. Accordingly, applications for approval upto USD 11 million will be considered by the Exchange Control Department of RBI Mumbai. This change in the ECB guidelines would be effective from 1. 1. 1999 Accordingly, corporates seeking ECBs upto USD 10 million may approach, RBI after 1.1.1999 and applications received in the ECB Division, Ministry o Finance prior to 1. 1. 1999 will be processed by Ministry of Finance³ .

Short‑term loan from RBI

25. While ECB for minimum maturity of three years and above will be sanctioned by Department of Economic Affairs Ministry of Finance. Approvals of short‑term foreign currency loans with a maturity of lest than three years will be sanctioned by RBI, according to RBI guidelines.

Validity of approval

26. Approvals are valid for a period of six months, i.e. the executed copy of the loan agreement is required to be submitted within this period. In the case of FRNs bonds, etc., the same are required to be launched within this period.

In case of power projects, the validity of the approval will be for a period o one year and 9 months in the case of telecom sector project. Bonds, Debentures FRNs and other such instruments will have additional validity period of three months for all the ECB approvals across the board. Extension will not be granted beyond the validity period. However, borrowers are free to submit fresh application, after a gap of one month, from the expiry of validity period which will be evaluated in the light of the ECB guidelines applicable at that time.

In case of infrastructure projects, however, because financial closure may get delayed for reasons beyond the investor's control, extension of validity may be considered on merits.

Pre‑payment of ECB

27. (a) Prepayment facility would be permitted if they are met out of inflow of foreign equity¹ .

(b) In addition to ECB being prepaid out of foreign equity, corporate can avail either of following two options for prepayment o their ECBs :

(i) On permission by the Government, prepayment may bi undertaken, within the permitted period, of all ECBs with residual maturity up to one year.

OR.

(ii) Pre payment upto 10% of outstanding ECB to be permitted once during the life of the loan, subject to the company complying with the ECB approval terms. Those companies who had already availed prepayment facility of 20% earlier would not be eligible.

(i) Prepayment approval for ECBs other than Bonds/Debentures/FRNs, will be 15 days or period upto next interest., payment date, whichever is later.

(ii) In case of Bonds/FRNs, validity of permission will not b more than 15 days.

Prepayment will be allowed with the prior permission of ECI sanctioning authority i.e. Department of Economic Affair! Government of India/ECD, RBI.²

Refinancing the Existing Foreign Currency Loan

28. Refinancing of outstanding amounts under existing loans by raising fresh loans at lower costs may also be permitted on a case‑to‑case basis, subject to the condition that the outstanding maturity of the original loan is maintained Rolling over of ECB will not be permitted.

29. A corporate borrowing over for financing its Rupee‑related expenditure and swapping its external commercial borrowings with another corporate which requires foreign currency funds will not be permitted.

Liability Management

30. Corporate can undertake liability management for hedging the interest and/or exchange rate risk on their underlying foreign currency exposure. Prior approval of this Department or RBI has been dispensed with for concluding or winding up of the following transactions:

(i) Interest rate swaps

(ii) Currency swaps

(iii) Coupon swaps

(iv) Purchase of interest rate caps/collars

(v) Forward rate agreements.

Corporates may refer to RBI's A.D. (M.A. Series) Circular No. 12 dated5d August, 1996¹ .

II. PROCEDURE FOR SEEKING ECB APPROVAL

31. Applications for approval upto USD 10 million will be considered be the Exchange Control Department of RBI, Mumbai, w.e.f. 1.1.1999² .

32. Applications for amount more than USD 10 million and under structured obligation may be submitted by the borrowers in the prescribed format (Annexure)³ to the Joint. Secretary (ECB), Department of Economic Affairs Ministry of Finance, North Block, New Delhi-110 001.

33. The application should contain the following information:

(i) An offer letter from the lender giving the detailed terms and conditions;

(ii) Copy of Project Appraisal Report from a recognised Financial Institution/Bank, if applicable;

(iii) Copies of relevant documents and approvals from Central/State Governments, wherever, applicable, such as FIPB, CCEA and SIA clearances, environmental clearance, techno‑econornic clearance from Central Electricity Authority, valid licences from Competent Authorities, no objection certificate from Ministry of Surface Transport, evidence of exports/foreign exchange earnings from the statutory auditor based on the tankers realisation certificate, registration with RBI in case of NBFCs, approval for overseas investment from RBI etc.

Review

34. The ECB guidelines and procedures will be periodically reviewed by the Government in the light of prudent management of external debt, changing market conditions, sectoral requirements etc.

35. The ECB policy and procedures outlined above is operative from 1st April, 1999.

36. Guidelines are available at web site http/www.nic.in/finmin.

ECB GUIDELINES ‑ MODIFICATIONS ISSUED IN FEBRUARY, 2000¹

The Government had last issued ECB guidelines in July 1999. Government keeps ECB policy under constant review to take into account among various factors, changes in external financial markets, requirements of corporates, access to international capital markets. After review, Government has decided to make the following changes in ECB guidelines:

I. Structured Obligation

As per para 19(e) of ECB guidelines, the liability of an Indian company shall be denominated in Indian Rupees and debt servicing may be done in equivalent foreign exchange funds. The Government had decided that henceforth denomination of debt service in a post default situation may be in Rupees or in Forex as envisaged initially in the contract document.

II. Infrastructure Projects

ECB guidelines (Para 9 and 10) give the flexibility to domestic investors to raise ECBs up to a maximum of USD 50 million equivalent to finance their equity investment in a subsidiary joint venture company implementing infrastructure project(s). In order to provide greater flexibility to domestic holding companies/promoters, Government has decided to enhance this limit to USD 200 million to finance equity investment in downstream infrastructure project(s).

III. Prepayment of ECBs

At present prepayment of ECBs upto 100% of outstanding balance is permitted provided prepayment is to be effected from foreign equity inflow or residual maturity is up to one year. In addition, it has been decided to permit 100% prepayment, where the source of funds is from EEFC account(s).

IV. 100% E0Us

100% export oriented units will be permitted to have foreign currency exposure upto 60% of the project cost.

V. End use Relaxation

Over a period of time, Government has progressively relaxed end‑use(s) restriction on the use of the foreign currency loans. It has been decided that henceforth ECBs can be used for any purpose except investment in real estate and in capital markets.

VII Government equity holding in PSUs

It has been found that borrowings by P8Us invariably contain covenants that Government will continue to hold at least 51% of equity in PSUs concerned. In view of on‑going dis‑investment programmes such covenants should not be incorporated in the loan agreements.

VII Operating Expenses

In respect of operating and out‑of‑pocket expenses incurred for ECB approvals not resulting in loans, such expenses will be allowed as per prevailing RBI guidelines on current account transactions subject to a cap. Corporates will obtain specific approval of RBI for remittances of such expenses. RBI will issue appropriate instructions in this regard.

VIII. ECB approval procedures

(a) At present a borrower has to approach Government twice, once for obtaining in‑principle approval and secondly for submission of loan agreements for taking on record (TOR). After TOR the borrower approaches RBI for FERA approval and permission for draw down. Thus, there are three stages. As a measure of simplification, it has been decided that the Regional Offices of RBI would take loan agreement documents on record of all ECB approvals once they have been approved by the Government/RBI as the case may be. RBI will send a copy of loan documents/TOR records to DEA. RBI will issue appropriate instructions in this regard.

(b) Default Interest:‑ Default interest not exceeding 2% over the applicable rate will be incorporated in the approval letter/taken on record letter itself. No further approval would be required from the Government/ RBI.

IX. ECB entitlement for infrastructure projects

All infrastructure projects will be permitted to have ECB exposure to the extent of 50% of the project cost as appraised by a recognised financial institution/bank; subject to fulfilment of other ECB guidelines. Greater flexibility beyond 50% of the project cost may be allowed in case of power sector and other infrastructure projects based on merits.

X. Above amendments to the ECB guidelines will come into force from date of issue of this Press Release.

ECB GUIDELINES ‑ MODIFICATIONS ISSUED IN JUNE, 2000¹

The Government had issued a Press Release dated 9th February, 2000 to amend external commercial borrowings (ECB) guidelines, released in July 1999. Taking into account changes in external financial markets, requirements of corporates, access to international capital markets and with a view to liberalizing further ECB approvals, the Government have decided to make the following further changes in the ECB guidelines :

ECB approvals on automatic route²

I. The Government have decided, in principle to place fresh ECB approvals upto USD 50 millions and all refinancing of existing ECBs under the automatic route. Necessary software and institutional arrangements are being developed to operationalise the automatic route. Reserve Bank of India (RBI) is being requested to work out modalities for implementation.

Delegation to RBI for fresh ECB approvals for amounts upto USD 100 million

II. Presently, RBI is empowered to give ECB approvals under 'USD 5 Million Scheme' and to approve ECB upto USD 10 million under all other windows. Government have decided to delegate further the ECB sanctioning powers upto USD 100 million under all Windows to Reserve Bank of India. Corporates and institutions are advised to submit their applications to Exchange Control Department of RBI, Central Office, ECB Division, Mumbai.

Further enhancement and delegation in respect of prepayments of ECBs

III. At present, prepayment approvals are being given by Ministry of Finance/RBI, depending on who had given the initial ECB approval. Hence forth, RBI will give all such approvals, as per prevailing guidelines on prepayment, even in case where ECBs have been approved earlier by Ministry of Finance. For this purpose, Corporates concerned may approach Exchange Control Department, RBI, Central Office, ECB Division, Mumbai, through the designated authorised dealer giving details, as set out in the annexure to this Press Release, duly certified by the Statutory Auditors.

Definition of infrastructure sector for ECB purposes

IV. Maximum limit of ECB for financing equity investment in a subsidiary/ joint venture company, implementing infrastructure projects was enhanced from USD 50 million to USD 200 million vide press release dated 9th February, 2000. Similarly, ECB exposure for all infrastructure projects was enhanced to 50 per cent of the project cost as appraised by a recognised financial institution/ bank. It was also decided to even allow exposure beyond 50 per cent of the project cost in the case of power projects and other infrastructure projects on merits of each case. It is clarified that the following sectors will qualify as 'infrastructure sectors' under the ECB guidelines

(a) Power; (b) Telecommunication; (c) Railways; (d) Roads including bridges; (e) Ports; (f) Industrial parks; (g) Urban infrastructure ‑ Water supply, sanitation and sewage projects.

All‑in‑cost ceiling

V. For the information of all concerned, the existing 'all‑in‑cost ceilings'. for normal projects, infrastructure projects and for long‑term ECBs are 300, 400 and 450 basis points over six months LIBOR, for the respective currency in which the loan is being raised or applicable bench mark(s), as the case may be.

Average maturity

V1. The average maturity of ECBs for the purpose of ECB guidelines shall be weighted average of all disbursements taking each disbursement individually and its period of retention by the borrower.

Structured obligation facility for NBFCs

VII. Corporates can avail of the facilities under the credit enhancement scheme as per conditions stated in para 19 of the ECB guidelines. Non‑Banking Finance Companies (NBFCs) would also be eligible to avail of this facility on compliance with the following additional conditions :

(a) NBFC should be registered with RBI.

(b) It should have earned profits during the last tree years.

However, in the case of NBFCs where a credit enhancement guarantee has been, provided by its parent company on 'non‑recourse and non-repatriable basis', the condition of three years' track record of profit will not be applicable and the credit rating of 'A or equivalent' would also be acceptable in such cases.

VIII. The above changes in the approval system will be subject to observance, of ECB guidelines by the borrowers.

IX. The above amendments to the ECB guidelines will come into force from date of issue of this Press Release.

ANNEXURE

Request for prepayments should be forwarded with the following information duly certified by the statutory auditors

1. Loan amount, sanction letter No. and date (Loan Key No.)

2. Net amount drawn after making payment for fee/commission, etc.

3. Amount utilised for approved end‑use duly supported by a certificate from the statutory auditors, indicating that the necessary documentary evidence has already been submitted to the concerned Regional Office of RBI and balance unutilised amount, if any.

4. Amount of ECB proceeds parked abroad‑ Name of the bank, account No., RBI's sanction letter, certified copy of latest statement, etc.

5. Amount of loan repaid and balance outstanding.

6. Residual maturity of the loan and the last date of repayment.

7. Whether any prepayment approval has been obtained by the company against this loan in the past. If so, details thereof.

8. Prepayment premium (excluding Bonds/FRN issues).

9. Source of funds from which the prepayment is proposed to be effected.

10. Date of proposed prepayment.

11. If the prepayment is proposed to be made from EEFC account, a certificate from the authorised dealer indicating the amount outstanding in EEFC Account.

ECB GUIDELINES ‑ MODIFICATIONS ISSUED IN SEPTEMBER, 2000¹

The Government had issued a press release on 14th June, 2000, to amend External Commercial Borrowings (ECB) guidelines, issued in July, 1999. As part of the amendments, it was decided, in principle, to place fresh ECBs approvals up to US $ 50 million and all refinancing of existing ECBs under the automatic route. After having reviewed the necessary institutional arrangements, Government have decided to operationalise the automatic route as follows : -

I. Automatic route ‑ Under the automatic route arrangement, any corporate, being a legal entity, registered under the Companies Act, Societies Registration Act, Co‑operative Societies Act, including proprietorship/partnership concerns, will henceforth be eligible to enter into loan agreements with overseas lender(s) for raising fresh ECB for an amount up to US $ 50 million or for refinancing an existing ECB provided it is in compliance with ECB guidelines framed by Ministry of Finance and regulations/directions/circulars issued by the Reserve Bank of India in this regard. Corporates would not be required to obtain any prior approval for raising ECBs upto to US $ 50 million or for refinancing of an existing ECB from Ministry of Finance or Reserve Bank of India (RBI)

The corporate shall submit through an authorised dealer of its choice three copies of the loan agreement to the concerned Regional Office of RBI after signing the same with the lender. The Regional Office of RBI would acknowledge the receipt of copies of the agreement and would allot a loan identification number to such an agreement. The primary responsibility to ensure that ECBs raised are in conformity with ECB guidelines and RBI's Regulations/Directions/ Circulars would be that of the concerned corporate. If, however, on scrutiny of the loan agreement, at a later stage, any violation is found, appropriate action will be taken by RBI under the FEMA.

Corporate(s) would also be permitted to make necessary draw‑down under the automatic route without any further permission from RBI. They would however, be required to file quarterly returns in a prescribed format through their authorised dealers. The withholding tax exemption would continue to be granted by Ministry of Finance (Department of Revenue/Department of Economic Affairs).

II. Common formats for ECB applications ‑ There are different ECB formats for making application to the Government of India (required presently in the cases of ECB applications for more than US $ 100 million) and to the Reserve Bank of India (now required for application for more than US $ 50 million but up to US $ 100 million). It has now been decided to prescribe uniform formats for ECB applications.

III. The Reserve Bank of India would issue necessary regulations/directions in respect of the automatic route for approvals and refinancing and prescribe common formats. The above amendments will be effective from the date of issue of notification of such regulations/directions.

ECB GUIDELINES ‑ MODIFICATIONS ISSUED IN JULY, 2002¹

Government has received some suggestions regarding permitting use of ECB proceeds to acquire shares of PSUs under the disinvestment programme of the Government. As per the current ECB guidelines it is prescribed that under no circumstances, ECB proceeds will be utilised for (i) investment in stock market; and (ii) speculation in real estate² [para 15(C)] of the guidelines on ECB Policies and Procedure, 1999‑2000.

2. The suggestion is that in view of the impending large‑scale disinvestment of PSU stocks in the near future, Indian bidders would be required to mobilize huge sums of money for purchasing such stocks. The domestic bidders might suffer from two structural constraints. One relates to the restriction on bank financing to capital market and another relates to exposure limits to borrowers. Therefore, attention has been drawn to the prohibition of end‑use of proceeds of ADRs/GDRs/FCCBs/ECBs. The view is that this prohibition not only puts restrictions on Indian bidders in the first stage offer to the Government, but also to fund the second stage of mandatory public offer under SEB (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

3. In view of the Government's policy not promote the disinvestmen programme of PSU shares, the matter has been reconsidered.

4. In view of the above, a view has been taken that ECB proceeds could be used in the first stage acquisition of shares in the disinvestment process (because technically speaking it is not the prohibited end‑use of ECB being non‑stock exchange transaction) and also in the mandatory second stage offer to the public, in view of their strategic importance.

ECB GUIDELINES ‑ MODIFICATIONS ISSUED IN SEPTEMBER, 2002¹

The Government had issued the last consolidated ECB Guidelines in July 1999, subsequent amendments to these guidelines were, made for streamlining liberalising ECB procedures in order to enable Indian corporates to have greater access to international financial markets. The last being the Press Release date 3.7.2002. Taking into account changes in external financial markets, requirements of corporates, and with a view to liberalising further ECB approvals, the Government has decided to make the following changes in the ECB Guidelines

Recognised Lender

1. Applicants will be free to raise ECB from any internationally recognize source such as banks, export credit agencies, suppliers of equipment, foreign collaborators, foreign equity holders, international capital markets, etc. Offer from unrecognised sources will not be entertained and this would also b applicable for ECBs below USD 5 million.

Prepayment of External Commercial Borrowings (ECBs)

Il. Prepayment of ECBs has been delegated to RBI. It is now proposed that prepayment of ECBs will be permitted without any limit and also without an of the existing conditions given in para 1 (a) to (d) of RBI's A.P. (DIR Series) Circular No. 8, dated August 5, 2002. This window of prepayment would b effective upto 31st March, 2003. It would also be subject to review keeping i view the market conditions. The Reserve Bank of India will issue necessary Press Note incorporating the above, revised, prepayment guidelines.

Deletion of end‑use restrictions in respect of investments in real estate Sector

III. It has been decided to drop the restrictions of end‑use for ECB proceeds for investment in real estate sector. Henceforth, ECB could be raised for the development of integrated townships as defined by Ministry of Commerce and Industry, Department of Industrial Policy and Promotions SIA (FC Division) Press Note 3 (2002 Series, dated 4.1.2002). On the issue of maturity for such FDBs, it has been decided that the existing maturity guidelines would be applicable.

Maximum eligibility under auto‑route and corresponding maturity

IV. In terms of ECB guidelines, it has been decided that :

(a) A borrower can raise up to a maximum of USD 50 million under auto-route during a given financial year;

(b) In case a borrower decides to raise more than one ECB in a given financial year for the ECBs upto USD 20 million the minimum average maturity would be three years. For amounts in excess of USD 20 million, the average maturity would need to be five years.

Ineligibility of Trust and non‑profit making organisations to access ECBs

V. The issue of eligibility of Trust and non‑profit making organisations to access ECB was considered and it has been decided that there would be no change in the current ECB policy and Trusts/non‑profit making orgnisations would continue to be ineligible to raise ECBs.

Removal of restrictions on External Commercial Borrowings (ECBs) being raised by the Units in Special Economic Zones (SEZs)

VI. In the EXIM policy for 2002‑2007 announced on 31st March, 2002 it has been indicated that units in SEZs will be permitted to avail all ECBs for maturity of less than 3 years. To operationalise this decision of the Government conveyed through the EXIM policy the following amendments are proposed for units in SEZs:

(a) Units in SEZs may be allowed to raise External Commercial Borrowings without any maturity restriction but through recognized banking channels and strictly on a "stand alone basis".

(b) By "stand alone" it is meant that units in the SEZs would be completely isolated from financial contacts with their subsidiaries or their parent in the mainland or within the SEZs as far as repayment of ECB interest/ principal is concerned. Therefore, in effect only those units, which are either subsidiary/branch of a company registered outside India or where a company is registered independently for operating in one or more zone in the country, would qualify for stand alone criteria. Borrowers in the SEZs are to be allowed to raise ECB under the special window as announced in the EXIM Policy. They would service the loan (principal + Interest + any other fee, charge etc.) out of proceeds generated by the SEZ units.

(c) There would bean annual cap of US$ 500 million for such units in SEZs to avail this facility. Reserve bank of India (RBI) would monitor the overall cap. Necessary Guidelines will be issued by RBI in this regard.

(d) Treatment of debt:

(i) According to IMF classification the debts incurred by units in SEZs, would be treated as external debt of India.

(ii) However, this debt would be separately and uniquely identified while explaining that the units in SEZs will not have access to the! foreign exchange reserves of India for purposes of servicing the, debt.

2. The above amendments would be effective from the date of issue of notification of such regulations/directions.¹

ECB GUIDELINES ‑ MODIFICATIONS ISSUED IN NOVEMBER, 2003²

The Government had issued the last consolidated External Commercial Borrowings (ECBs) Guidelines in July 1999. Subsequent amendments to these guidelines were made ‑ the last being the Press Release dated 15.9.2002. In the background of developments in recent months, it has become necessary to carry out the following revisions in the existing ECB policy for a temporary period until further review.

(i) All ECBs shall be subject to the following revised maximum spreads over six month LIBOR, for the respective currency in which the loan is being raised or the applicable benchmark(s), as the case may

be :

Type of Projects

Existing

(All‑in‑cost)

Revised

(All‑in‑cost)

Normal Projects

Infrastructure

Long‑term

300

400

450

150

250

300

(ii) ECBs for meeting rupee expenditure under automatic route to be hedged unless there is a natural hedge in the form of uncovered foreign exchange receivables, which will be ensured by Authorized Dealers (ADs).

(iii) ECBs exceeding USD 50 million would be permitted for the following end uses only (a) Financing import of equipment and (b) Foreign exchange needs of infrastructure projects.

(iv) No financial intermediary (viz. a bank, DFI, or NBFC) will be either allowed access to ECBs or to provide guarantees. However, this will not apply to Textile and Steel restructuring packages which have already been announced by the Government in consultation with RBI.

(v) ECBs pending utilization would need to be parked overseas.

2. The above amendments to the ECB guidelines will come into force from the date of issue of notification of regulations/directions.

ECB Norms Relaxed to Rope in More Investment in Core Sector¹

The finance ministry has announced liberalisation of external commercial borrowing (ECB) policy. Infrastructure companies including those belonging to the small and medium sector will be above to raise ECBs under the automatic route as per the revised policy. The policy is subject to average maturity of five years.

The liberalised policy is expected to enhance investment activity in the infrastructure sector and enable corporates to access resources from international markets at competitive rates in consultation with the Reserve Bank of India (RBI).

The scheme aims at minimising discretionary elements, simplifies and rationalises the procedures, promotes transparency to all ECBs.

TEXT OF FOREIGN EXCHANGE MANAGEMENT

(BORROWING OR LENDING IN FOREIGN EXCHANGE)

REGULATIONS, 2000^*

In exercise of the powers conferred by clause (d) of sub‑section (3) of section 6, sub‑section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the following regulations for borrowing or lending in foreign exchange by a person resident in India; namely :

Short title and commencement.

1. (i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000.

(ii) They shall come into force on 1st day of June, 2000.

Definitions.

2. In these regulations, unless the context otherwise requires

(a) "Act means the Foreign Exchange Management Act, 1999 (42 of 1999);

(b) "authorised dealer" means a person authorised as an authorised dealer under sub‑section (1) of section 10 of the Act;

(c) "EEFC account”. 'RFC account means the accounts referred to in the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000;

(d) "FCNR (B) account, "NRE account mean the accounts referred to in the Foreign Exchange Management (Deposit) Regulations, 2000;

(e) 1ndian entity" means a company or a body corporate or a firm in India;

(f) "Joint Venture abroad" means a foreign concern formed, registered or incorporated in, a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity

(g) "Schedule" means the Schedule to these Regulations;

(h) "Wholly owned subsidiary abroad" means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and whose entire capital is owned by an Indian entity

(i) the words and, expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.

Prohibition to Borrow or Lend in Foreign Exchange.

3. Save as otherwise provided in the Act, Rules or Regulations made there under, no person resident in India shall borrow or lend in foreign exchange from or to a person resident in or outside India:

Provided that the Reserve Bank may, for sufficient reasons, permit a person to borrow or lend in foreign exchange from or to a person resident outside India.¹

Borrowing and Lending in Foreign Exchange by an Authorised Dealer.

4. (1) An authorised dealer in India or his branch outside India may lend in foreign currency in the circumstances and subject to the conditions mentioned below, namely:

(i) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may extend foreign currency loans in the normal course of its banking business outside India;

(ii) An authorised dealer may grant loans to his constituents in India for meeting their foreign exchange requirements or for their rupee working capital requirements or capital expenditure subject to compliance with prudential norms, interest rate directives and guidelines, if any, issued by Reserve Bank in this regard;

(iii) An authorised dealer may extend credit facilities to a wholly owned subsidiary abroad or a joint venture abroad of an Indian entity:

Provided that not less than 51 per cent of equity in such subsidiary or joint venture is held by the Indian entity subject to compliance with the Foreign Exchange Management (Transfer and Issue of Foreign Security) Regulations, 2000;

(iv) An authorised dealer may, in his commercial judgment and in compliance with the prudential norms, grant loans in foreign exchange to his constituent maintaining² [EEFC Account or] RFC Account, against the security of funds held in such account;

(v) A branch outside India of an authorised dealer may extend foreign currency loans against the security of funds held in NRE/FCNR deposit accounts³ maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2000;

(vi) Subject to the directions or guidelines issued by the Reserve Bank from time to time, an authorised dealer in India may extend foreign currency loans to another authorised dealer in India.s

¹ [(vii) An authorised dealer may grant foreign currency loans in India against the security of funds held in FCNR(B) account to the account holder only, subject to the guidelines issued by the Reserve Bank in this regard].

(2) An authorised dealer in India may borrow in foreign currency in the circumstances and subject to the conditions mentioned below, namely :

(i) An authorised dealer may borrow from his Head Office or branch or correspondent outside India Upto ² [twenty five per cent] of his unimpaired Tier I capital or US $ 10 million, whichever is more, subject to such conditions as the Reserve Bank may direct.

Explanation: For the purposes of clause (i), the aggregate loans availed of by all branches in India of the authorised dealer from his Head Office, all branches and correspondents outside India, shall be reckoned.

(ii) An authorised dealer may borrow in foreign currency without limit from his Head Office or branch or correspondent outside India for the purpose of replenishing his rupee resources, provided that

(a) the funds borrowed are utilised for his own business operations and are not invested in call money or similar other markets;

(b) no repayment of the loan is made without the prior approval of Reserve Bank, which may be granted only if the authorised dealer has no borrowings outstanding either from Reserve Bank or other bank or financial institution in India and is clear of all money market borrowings for period of at least four weeks prior to the week in which the repayment is made.

(iii) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may borrow in foreign currency in the normal course of its banking business outside India, subject to the directions or guidelines issued by the Reserve Bank from time to time, and the Regulatory Authority of the country where the branch is located.

(iv) An authorised dealer may borrow in foreign currency from a bank or a financial institution outside India, for the purpose of granting pres-shipment or post‑shipment credit in foreign currency to his exporter constituent, subject to compliance with the guidelines issued by the Reserve Bank in this regard.

Borrowing and Lending in Foreign Exchange by persons other than authorised dealer³

5. (1) An Indian entity may lend in foreign exchange to its wholly owned subsidiary or joint venture abroad constituted in accordance with the provisions of Foreign Exchange Management (Transfer or Issue of Foreign Security) Regulations, 2000.

(2) A person resident in India may borrow, whether by way of loan or overdraft or any other credit facility, from a bank situated outside India, for execution outside India of a turnkey project or civil construction contract or in connection with exports on deferred payment terms, provided the terms and conditions stipulated by the authority which has granted the approval to the project or contract or export in accordance with the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, are complied with

(3) An importer in India may, for import of goods into India, avail of foreign currency credit for a period not exceeding six months extended by the overseas supplier of goods, provided the import is in compliance with the Export Import Policy of the Government of India in force.¹

(4) A person resident in India may lend in foreign currency out of funds held in his EEFC account, for trade related purposes to his overseas importer customer :

Provided that,

(a) the aggregate amount of such loans outstanding at any point of time does not exceed US $ 3 million; and

(b) where the amount of loan exceeds US $ 25,000, a guarantee of a bank of international repute situated outside India is provided by the overseas borrower in favour of the lender.

(5) Foreign currency loans may be extended by Export Import Bank of India, Industrial Development Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India Limited, Small Industries Development Bank of India Limited or any other institution in India to their constituents in India out of foreign currency borrowings raised by them with the approval of the Central Government for the purpose of onward lending.

² [(6) Indian companies in India may grant loans in foreign currency to the employees of their branches outside India for personal purposes provided that the loan shall be granted for personal purposes in accordance with the lender's staff welfare scheme/loan rules and other terms and conditions as applicable to its staff resident in India and abroad.]

³ [(7) An individual resident in India may borrow a sum not exceeding US$ 250,000/‑ or its equivalent from his close relatives outside India, subject to the conditions that

(a) the minimum maturity period of the loan is one year;

(b) the loan is free of interest; and

(c) the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non‑resident lender.

Explanation: ‘Close relative' means relative as defined in Section 6 of the Companies Act, 1956.]

Other borrowings in foreign exchange with prior approval of Reserve Bank or Government of India.

6. (1) A person resident in India who desires to raise foreign currency loans of the nature or for the purposes specified in the Schedule and who satisfies the eligibility and other conditions specified in that Schedule, may apply to the Reserve Bank for approval to raise such loans.

(2) The Reserve Bank may grant its approval subject to such terms and conditions as it may consider necessary :

Provided that while considering the grant of approval, the Reserve Bank shall take into account the overall limit stipulated by it, in consultation with the Central Government, for availment of such loans by the persons resident in India.

(3) Any other foreign currency loan proposed to be raised by a person resident in India, which falls outside the scope of the Schedule, shall require the prior approval of the Central Government.

SCHEDULE

(See Regulation 6)

1. The borrowing in foreign exchange by a person resident in India may be under any of the Schemes set out in this Schedule.

2. The application for the approval of the Reserve Bank under Regulation 6 for borrowing under any of the Schemes shall be made in Form ECB annexed to these Regulations.

3. The borrowing in foreign exchange maybe from an overseas bank/export credit agency/supplier of equipment or foreign collaborator, foreign equity holder, NRI, ¹ [OCB], corporate/institution with a good credit rating from internationally recognised credit rating agency, or from international capital market by way of issue of bonds, floating rate notes or any other debt instrument by whatever name called.

4. The borrower shall not utilise the funds borrowed under any of these Schemes for investment in stock market or in real estate business.

(i) Short‑term loan scheme²

(a) Foreign currency credit extended by the overseas supplier of goods to an importer of goods for financing import of goods into India, provided the period of maturity of credit is more than six months but less than three years

(b) Foreign currency loan/credit extended to an importer in India for financing imports into India, by any bank or financial institution outside India, provided the period of maturity of loan/credit is less than three years.

(ii) Borrowing under US Dollar Five Million Scheme

Borrowing in foreign exchange upto US $ Five Million or its equivalent by an Indian entity for general corporate purposes at a simple minimum maturity of three years.

(iii) Borrowing under US dollar Ten Million Scheme

Borrowing in foreign exchange not exceeding US $ Ten Million or its equivalent by an Indian entity for the following purposes:

(a) Borrowing for Financing of Infrastructure Projects³

(i) Borrowing in order to finance equity investment in a subsidiary/joint venture company promoted by the Indian entity for implementing infrastructure projects, provided that the minimum average maturity of loan is three years. In case the loan is to be raised by more than one promoter entity for a single project, the aggregate of loan by all promoters should not exceed US $ 10 million.¹

(ii)Foreign currency loan raised by an Indian entity for financing infrastructure project, provided that the minimum average maturity of loan is not less than three years.

(b) Borrowings by Exporter/Foreign Exchange Earner ‑ Borrowing in foreign exchange by an exporter/foreign exchange earner upto three times of the average amount of his annual foreign exchange earnings during the previous three years subject to a maximum of US $ Ten Million² or its equivalent, with a minimum average maturity of three years.

(c) Long‑term borrowings ‑ Borrowing for general Corporate purposes at the minimum average maturity of eight years.³

⁴ [(iv) Scheme for raising loans from NRIs on repatriation basis Borrowings not exceeding US $ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that -

(a) the loan is free of interest;

(b) the minimum maturity period of the loan is seven years;

(c) the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to tile NRE/FCNR account of the non‑resident lender;

(d) the loan is utilised for the borrower's personal pup‑poses or for carrying on his normal business activity but riot for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for relending.

Explanation ‑ "Close relative" means relatives as defined in section 6 of the Companies Act, 1956.]

APPENDIX 11.I

FORM ECB

Application for permission to raise External Commercial Borrowings

under Short Term Loan/Credit/USD 5/10 million Scheme

Instructions

The application complete in all respects should be submitted in duplicate by the applicant through the authorised dealer designated by him to handle the matters relating to the foreign currency borrowings/credit to the Chief General Manager, Exchange Control Department, Central Office, EC Division, Reserve Bank of India, Mumbai‑400 001. In respect of short term loan/credit for imports, it should be submitted through the authorised dealer through whom the import documents have been received/will be received.

Documentation

Following documents, (as relevant) duly certified by authorised dealer, should be forwarded with the application.

(i) A copy of offer letter from the overseas lender/supplier furnishing complete details of the terms and conditions of proposed loan/credit arrangement.

(ii) Copies of FIPB/SIA/CCEA approvals wherever applicable.

(iii) In case the application is being made under Exporters'/Foreign Exchange Earners' Scheme, bank certificates in respect of export realisation of past 3 years.

(iv) If the applicant is NBFC, a copy of credit rating awarded by a recognised credit rating agency and copy of RBI registration certificate.

(v) A copy of the import contract, proforma/commercial invoice/Bill of Lading

(vi) A report from an international credit rating agency of repute, if the lender is other than the recognised category as per ECB Guidelines issued by the Government from time to time.

(vii) In case the payment for import is through Letter of Credit, a copy o UC with amendment, if any.

PART A - CATEGORY OF ECB APPLICATION

The application is being submitted under following scheme:

[Please put (X) in the correct box]

(1) Under short term credit loan

(2) Under USD 5 Million Scheme

(3) Under USD 10 Million Scheme

(a) Exporters'/Foreign Exchange Earners' Scheme

(b) Long Term Borrowers' Scheme

(d) Other (Please Specify)

PART B ‑ GENERAL INFORMATION ABOUT THE BORROWER

1. Name of the applicant

(Block Letters)

Address

2. Status of the applicant firm/company Private Public NBFC

Sector Sector (Indicate RBI Registration Number)

3. Details of Foreign Currency Loans (ECB) availed of and/or approval obtained by the applicant during past 3 years under US $ 5 Million Scheme

RBI/GOI approval

No. & date

Amount

outstanding

Due date of final

Repayment

4. Details of ECB parked abroad

	Sr. No.	Name of the Bank	Amount in USD equivalent	No. & date of RBI permission obtained for parking funds abroad and validity period thereof

PART C – INFORMATION ABOUT THE PROPOSED LOAN/CREDIT

1. Details of the loan/credit

Currency	Amount	US $ equivalent

Purpose of the loan

Nature of ECB (Please put (x) in the appropriate box)

(i) Suppliers' Credit

(ii) Buyers' Credit

(iii) Syndicated Loan

(iv) Export Credit

(v) Loan from foreign collaborator/equity holder

(vi) FRN/Bonds

(vii) Others (please specify)

Terms and conditions of the loan

(i) Rate of interest

(ii) Up front fee

(iii) Management fee

(iv) Other charges, if any (Please specify)

(v) All‑in‑cost

(vi) Commitment fee

(vii) Rate of Penal interest

(viii) Period of loan

(ix) Grace/moratorium period

(x) Repayment terms (half yearly/annually/bullet)

(xi) Average maturity

2. Details of the lender Name and address of the lender/supplier

3. Nature of security to be provided, if any

PART D ‑ INFORMATION ABOUT DRAW DOWN AND REPAYMENTS

Proposed schedule

Draw down Repayment/payment

Month And Year Amount Principal Interest

PART E‑ADDITIONAL INFORMATION REQUIRED FOR

APPLICATIONS UNDER SHORT TERM CREDIT/LOAN

1. Particulars of commodity(ies) to be imported : Description Value

2. Details of imports made/to be made

(A) (i) Payment Terms :

(ii) Due date of the import bill :

(iii) Extension sought upto :

(iv) If import has already been made Value

assessed as per Bill of Entry

(Please enclose a copy) :

(B) If goods are yet to he received

(i) Date of shipment :

(ii)Whether goods have been sold on high

Seas or any such sale is contemplated? :

3. Period upto which statement giving details of

drawals, utilisation & outstanding has been

submitted to RBI for loans raised in the past :

PART F ‑ ADDITIONAL INFORMATION IN RESPECT OF ECB UNDER

USD 5/10 MILLION SCHEME

1.Details of the project

(i) Total project cost in USD
(ii) Total ECB as a % of project cost

2.Export realisation (USD equivalent) of the applicant during the last 3 years [To be furnished only in case of applications under Exporters' Foreign Exchange Earners' Scheme]

PART G – CERTIFICATIONS

1. By the applicant

We hereby certify that

(i) the particulars given above are true and correct to the best of our knowledge belief.

(ii) the credit/loan to be raised will be utilised for the purpose for which it is being applied for vide this application and shall not be utilised for investment in stock ma and real estate.

……………………………..

(Signature of Authorised Official

of the applicant)

Name………………………….

Place………………..

Date………………..

2. By the authorised dealer

We hereby certify that

(i) the applicant is our customer.

(ii) we have scrutinised the application and the original letter of offer from lender/supplier and also all the documents relating to the import/proposed imp proposed borrowing/financing arrangement and have found the same to be in order

…………………………………

(Signature of Authorised Official)

Name…………………………..

Name of the Bank/Branch……..

A.D.Code……………………...

Place ...............

Date………….

APPENDIX 11.II

^* ECB 2

Details of Actual Transactions of Foreign Currency Loans/

Financial Lease (Other Than Short‑Term Foreign Currency Loans)

Statement for the quarter ended ...........................................

Instructions :

1. This statement should be submitted in duplicate, to Reserve Bank within 10 days from the close of the quarter to which it relates furnishing details of all types of foreign currency borrowings viz. foreign currency, loans, suppliers credits, bonds, convertible bonds, FRNs, cross‑border financial lease, etc. If there are no transactions during a particular quarter, a “Nil”. Statement indicating only the outstanding balance of the loan/credit should be submitted

2. One copy of this statement should be accompanied by an Annexure in the attached form, along with a complete set of documents towards utilisation of loan/credit. The information furnished in the Annexure should be certified by the statutory auditors/Chartered Accountant.

3. In case of suppliers credits, the dates of imports are to be given in place of dates of drawals.

4. For utilisation of drawal following codes should be used ‑

1. ‑ Import of capital goods

2. ‑ Import of raw material

3. ‑ Remittance to India

4. ‑ Pre‑payment of old loans/repayments

5. ‑ Amount held abroad in Foreign Currency Account

6. ‑ Interest Payment

7. - Payment for Technical services

8. ‑ Others (Specify)

5. For source of funds following codes should be used ‑

A -Remittance from India

B ‑ From FCL funds held abroad

C - From foreign currency account held abroad

D ‑ Conversion of equity capital

E ‑ From export proceeds held abroad

F ‑ BY debit to EMEEFC account in India

G ‑ Others (Specify)

6. If repayment schedule indicating exact dates of payments has not been submitted at the time of agreement, the same should be given with the statement. Any revision in repayment schedule made subsequently should also be indicated.

7. All dates should be given as YYYY/MM/DD such as 1996/06/30 for June 30,1996.

8. Indicate tranche Number if the loan is multi‑tranche, for item 5, 6 and 7.

1. (a) Government Loan Key Number :

(b) RBI Registration Number :

2. Name & Address of Borrower/Lessee :

(for RBI use)

3. Currency and Amount of Loan :

(for RBI use)

4. Country of Lender :

(for RBI use)

5. Draw down Transactions during the quarter : Tranche No. :

No.

Date of drawal/import (see instruction 3)

Currency

Amount

Amount of loan approved but not yet drawn

6. Utilisation during the quarter Tranche No. :

No.

Date

Purpose (only codes) (See instruction 4)

Country

Currency

Amount

7. Debt Servicing ‑ Remittances during the quarter Tranche No. _______

No.	Purpose	Date of remittance		Currency	Amount	Source (only codes)
		Due date	Actual date of remittance			(See instruction 5)
1 .	Principal
2.	Interest
	Others (Specify)

8. Amount of loan/credit outstanding at the end of the quarter Currency _______

Amount ___________

(for RBI use)

9. Country to which remittance sent_______________________________________

10. Repayment schedule

(i) Number of instalments :

(ii) Number of payments in a year :

(iii) Currency and amount of each instalment :__________________

(iv) Date of first payment (YYYY/MM/DD) :

(v) Date of final payment (YYYY/MM/DD) :

(if instalments are of unequal amount or are not regular, furnish details of each instalment with date and amount in the following format by way of a separate sheet).

No.

Date (YYYY/MM/DD)

Currency

Principal

Interest

We hereby certify that the particulars furnished above are true and correct to the best of our knowledge and belief.

We confirm that prior approval of Reserve Bank of India/Authorised Dealer was obtained by us by submitting application in form ECB 3 in respect of all the remittances made by us as described above.

…………………………

(Signature of Authorised Official of the borrower/lessee)

STAMP

Place ................... Name:………………………….

Date: …………… Designation: ……………………

(Certificate by an Authorised Dealer)

We hereby certify that the information furnished above with regard to debt servicing, out standings and repayment schedule is true and correct as per our record.

……………………………………………

(Signature of Authorised Official)

Name: ……………………………………

Designation: ………………………………

Place: ……….. Name & Address of Authorised Dealer…..

Date:............... Uniform Code No………………………….

STAMP

(Space for use of the Reserve Bank of India)

This statement has been scrutinised as per instructions contained in the Book of Instructions and circulars issued from time to time and found to be in order. Code numbers against items nos. 2,3,4,8,9 and 10 (iii) have been supplied in the relevant boxes. Further, the identification details of the loan/ credit in question have been agreed with the corresponding entries in the statement furnished earlier to DESACS vide Form 83. Information supplied in this statement has been posted in the register in Form 85.

Reserve Bank of India Assistant Manager

Exchange Control Department Date

Details of utilisation of foreign currency loan/credit

(This supplementary statement should be submitted with ECB 2 with a complete set of documentary evidence in support of utilisation of loan/credit, till such time the loan/credit has been fully utilised and all the relative documents submitted to Reserve Bank)

Report for the period ended____________________

1 Name of the borrower

2. FCL Registration No.

3. Government Loan Key No./Sanction No.

We state that we are permitted to raise a foreign currency loan/credit for ___________ (amount) from ______________for the Purpose ____________________________

We hereby certify that the amount of loan/credit has been utilised by us fully partly for the approved purpose strictly in accordance with the terms and conditions of the loan approved by Government of India and Reserve Bank of India.

The details of utilisation are as under

1. Loan utilised for the purpose of ‑

(A) If it is for Imports ‑

(a) Description of goods imported

(b) Value of imports

(i) Original Invoice No. & date

(ii) EC copy of Bill of entry for Home Consumption (No. & Date)

(iii) EC copy of import licence, if any ‑No. & date (iv) Others (specify)

(B) If it is for a purpose other than for imports, please State ‑

(a) Purpose

(b) How actually the foreign currency has been disposed/utilised?

2. Any other information ‑

3. The unutilised amount of loan stands parked in our account No. ___________ with ________________ (Name and address of bank) and its utilisation will be reported in the next ECB 2 statement(s). We note that if we decide not to utilise this balance amount, we shall report the details to Reserve Bank and seek further instructions.

4. We certify that the information furnished above is true and correct. No material information which may affect the Reserve Bank decision to allow the remittances connected with this loan/credit, has been withheld by us.

5. ^* We certify that we sanction and disburse foreign currency loans to our customers/borrowers strictly in accordance with the terms and conditions approved by Government of India and Reserve Bank of India and ensure that the funds are utilised by those borrowers for the purpose for which the loans are disbursed to them.

……………………………….

(Authorised Signatory)

[Affix here stamp/seal Name: .....………………………….

of the corporate office Designation: ………………………..

of the authorised signatory] Full address: ………………………

Date : _____________

[Statutory Auditor's/Chartered Accountant's Certificate]

We hereby certify that the foreign currency loan/credit permitted to be raised by RBI vide its letter No.…..............dated .............................. and bearing Registration No. …………………. Has been raised by ……………………………. (Name of the borrower) from ………………… (Name of the lender/lessor) and duly accounted for in its books of account and related record. Further, the loan has been utilised by the said borrower for the declared purpose of ………………………. as approved by Government of India vide its letter No. …………………………… dated …………………. We have verified all the relevant documents and record connected with the utilisation of loan/credit and found these to be in order in accordance with the terms and conditions of approval granted by Reserve Bank as also the provisions of Exchange Control Manual, 1993 Edition and to our satisfaction.

…………………………………….

(Authorised Signatory)

Name: …………………………….

STAMP

Place: ……………… Address:……………………………

Date : ……………… Registration No. : ………………….

For Office Use

APPENDIX 11.III

ECB 5

[Paragraph 7B.8(ii)]

Statement showing drawals, utilisation, repayment and outstandings of

short‑term foreign currency loan/credit for the month

ended ..................................

Instructions

This statement should be completed and submitted by the borrower to the concerned Regional Off of Exchange Control Department, Reserve Bank of India duly certified by the authorised dealer details of actual utilisation of the loan/credit should be furnished by way of an annexure in the attached Form together with a complete set of documents evidencing

utilisation of loan/credit viz. Exchange Control copy of Bill of Entry for Home Consumption, Import Licence (where the

import is again licence) and original commercial invoice.

1. (i) RBI Registration Number

(ii) Amount of loan/credit approved :Currency ………………

Amount ……………….

[For RBI use]

2. Name and Address of Borrower : ………………………………

[For RBI use]

3. Country of Lender :

[For RBI use]

4. Amount outstanding as at the beginning of the month : Currency ..........…

Amount …………. [For RBI use]

5. Drawdown Transactions during the month

No.

Date of drawal

Currency

Amount

Balance Amount yet to be drawn

at the end of the month

6. Utilisation during the month

No.

Date

Particulars of imports ^@

Country

Currency

Amount utilised

Balance Amount yet to be utililsed at the end of the month.

7. Remittance during the month (Debt Servicing)

No.

Purpose

Date of remittance

Currency

Amount

Country to which sent

Principle

(a)

(b)

(c)

Interest

(a)

(b)

(c)

8. Name and Code of Authorised Dealer through which remitted: ____________

9. Amount of loan/credit outstanding at the end of the month [To be repaid] :currency ________

Amount _____________ [For RBI use]

10. Import documents submitted in the month of : ____________________

STAMP

We hereby certify that the particulars given above are true and correct to the best of our knowledge belief.

Place : .......… ……………………………………

Signature of Authorised official

Name :……………………………

Date : ............

[For use of Authorised Dealer]

This is to certify that the particulars furnished in the application have been scrutinised by us and found to be correct

Place : ................ …………………………………..

STAMP

Signature of Authorised Official Name:………………………………

Date : .................. Designation: ………………

Details of utilisation of short‑term foreign currency loan/credit

[This should be submitted with ECB 5 with a complete set of documentary evidence in sup of utilisation of loan/credit, till such time the loan credit, has been fully utilised and all the relative documents submitted to RBI

Report for the month ended…………………..

1. Name of the borrower :

2. FCL Registration No. :

We state that we were permitted to raise a foreign currency loan/credit for…………… (amount) from…………. for the purpose of …………………………

We hereby certify that the amount of loan/credit has been utilised by us fully/partly for the approved purpose strictly in accordance with the terms and conditions of the loan approved by Reserve Bank of India.

The details of utilisation are as under:

(a) Description of goods imported

(b) Value of imports

[Enclose the following documents]

(i) Original Invoice No. & date

(ii) EC copy of Bill of entry for Home Consumption (No. & date)

(iii) EC copy of import licence, if any, No. & date)

(iv) Others (specify)

We certify that the information furnished above is true and correct. No material information which may affect the RBI decision to allow the remittance connected with this loan/credit, has been withheld by us.

……………………………………..

(Authorised Signatory)

[Signature and date]

Place ............... Name:………………………..

Designation…………………………

Date ............... Full address…………………….

Authorised Dealer's Certificate

We hereby certify that the foreign currency loan/credit permitted to be raised by RBI vide its letter No……………… dated ……………. and Registration No. ……………….. has been raised by (Name of the borrower) and utilised by the said borrower for the declared purpose of……………………..

We have verified all the relevant documents and our record connected with the utilisation of loan/credit and found these to be in order in accordance with the terms and conditions of approval granted by RB Ls also the provision of Exchange Control Manual, 1993 edition and to our satisfaction.

Place:………………… ………………………………………

Signature of Authorised Dealer

Designation:……………………

Date : ................ Address……………………………..

[FOR OFFICE USE]

APPENDIX 11. IV

Format for providing information to Department of Economic Affairs, Ministry of Finance for Seeking ECB Approval

1. (i) Name of the Company :

(ii) Private Sector/Joint Sector/Public Sector, etc.

(iii) Activities, in brief:

2. In case (i) is a subsidiary, then name of the Group Company

3. (i) Name of the Project :

(ii) Whether new/expansion/upgradation:

4. Location of the Project (Address)

5. Total project cost :

(i) In USD equivalent

(ii) In Rs. crores

6. Overall financing plan: USD Min. Rs.Cr.

(i) Debt

Domestic: Commercial Banks

Financial Institutions

Others (please specify)

Foreign: Loans

FRNs/Bonds

FCCBs

Others

(ii) Equity

Domestic: Promoter's

Public Corporates

Financial Institutions

Others (please specify)

Foreign: Promoter's

Others (please specify)

(iii) Grand Total: (i.e. total project cost as in items 5 above)

7. Date of commissioning of the project :

8. Amount of ECB proposed to be availed:

(i) In Foreign Currency

(ii) In USD equivalent

9. Nature of ECB :

(i) Supplier's Credit

(ii) Buyer's Credit

(iii) Syndicated Loan

(iv) Export Credit

(v) Loan from foreign collaborator/equity‑holder

(vi) FRN/Bonds

(vii) Others (please specify)

10. Name of Lender/Supplier:

11. Terms and conditions in brief

(i) Rate of Interest

(ii) All‑in‑cost

(iii) Repayment schedule

(iv) Average maturity

12. Purpose of raising ECB

(i) For financing capital goods (please attach a list of the items) (a) Imports (b) Indigenous

(ii) For general corporate objectives

(iii) If (i)(a)then a confirmation that they are not in the negative list of Export‑Import Policy.

13. Expected schedule of drawdown~ with date of first drawdown

14. Whether the project has been appraised by a Financial Institution/Bank: Yes/No

(If yes, a copy thereof to be enclosed)

15. Financial ratios :

(a) (i) Foreign debt to foreign equity ratio

(ii) Total debt to total equity ratio :

(iii) Total ECB as a percentage of total project cost

(b) (i) Total ECB exposure of the applicant company and as a percentage of total debt.

16. Export performance of the Company (in USD equivalent; with evidence) if any :

(i) During current and last 3 years; and

17. ECB availed by the Company during the current and the last 3 years

Amount

(USD equivalent)

Year of approval

Purpose

18. ECB availed by other Group Companies during the current and the last 3 years:

Name of the Co

Amount

(USD eq.)

Year of approval

Purpose

Please attach a certificate from Statutory Auditor regarding the amount utilised.

19. Details of ECB proceeds parked outside the country by the company and other group companies.

Name of company

Amount of loan

& amount drawn

Date of approval

& taken on record

Amount of ECB proceeds parked outside

Period for which permission granted for parking (enclosed copy of RBI approval)

20. Details of contact person (such as name, designation, postal address, telephone/fax number), to enable quick references for Information/clarifications required, if any, relating to the application.

21. Certified that the information given above is true to the best of my knowledge and belief

Place: Authorised Signatory

Date: (Name of the Company)