External Commercial
Borrowings - Crystallisation of Liability
AP (DIR Series) (2001-2002) Circular No. 41, dated 29-4-2002
Corporates
in India, at times, raise External Commercial Borrowings (ECBs) against a
guarantee/letter of comfort from a bank in India. In certain cases the loan
liability of the corporates gets devolved on banks.
2. With a
view to providing greater freedom and flexibility to banks in their fund
management, it has been decided to grant permission to banks to crystallise
their foreign exchange liability in rupees, in select cases, where
circumstances so warrant, keeping in view the status of the account of the
borrower who had raised External Commercial Borrowing.
3. Therefore,
Authorised Dealers desirous of crystallising their foreign exchange liability,
arising out of guarantees provided for ECBs raised by corporates in India, into
Rupees may make an application to the Chief General Manager, Exchange Control
Department, External Commercial Borrowings Division, Reserve Bank of India,
Central Office, Mumbai, giving full details viz., name of the borrower,
amount raised, maturity, circumstances leading to invocation of
guarantee/letter of comfort, date of default, its impact on the liabilities of
the overseas branch of the Authorised Dealer concerned and other relevant
factors.
4. Authorised
Dealers may bring the contents of this Circular to the notice of their
constituents concerned.
5. The
directions contained in this circular have been issued under section 10(4) and
section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).