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External Commercial Borrowing

External Commercial Borrowing

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Published by: Vishal on May 03, 2010
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10/26/2011

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External CommercialBorrowing
 
This document includes basic understanding of the routes to raise ECB, eligibleparties and the regulations governing the flow of ECB in India.
2010
 
Vishal SinglaSymbiosis Institute Of International Business, Pune5/1/2010
 
2
 
Contents
1. Introduction
.................................................................................................... 3
2. A
UTOMATIC
R
OUTE
............................................................................................ 32.1
 
E
LIGIBLE
B
ORROWERS
.................................................................................. 32.2
 
E
LIGIBLE
L
ENDERS
........................................................................................ 42.3
 
P
ERMISSIBLE
A
MOUNT
................................................................................... 42.4
 
S
CRUTINY BY
AD
S
........................................................................................ 52.5
 
A
LL
-
IN
-C
OST
C
EILING
.................................................................................... 52.6
 
E
ND
U
SE
(P
ERMITTED
) .................................................................................. 62.7
 
E
ND
U
SE
(N
OT
-
 
P
ERMITTED
) ......................................................................... 72.8
 
G
UARANTEES
............................................................................................... 72.9
 
S
ECURITY
..................................................................................................... 72.10
 
P
ARKING OF
ECB
PROCEEDS
..................................................................... 102.11
 
P
RE
-P
AYMENT
.......................................................................................... 102.12
 
R
EFINANCING OF
L
OAN
.............................................................................. 112.13
 
H
OW
T
O GET
ECB .................................................................................... 112.14
 
V
ALIDITY OF
A
PPROVAL
............................................................................. 12
3. A
PPROVAL
R
OUTE
........................................................................................... 123.1
 
E
LIGIBLE
B
ORROWERS
................................................................................ 123.2
 
E
LIGIBLE
L
ENDERS
...................................................................................... 133.3
 
P
ERMISSIBLE
A
MOUNT
................................................................................. 143.4
 
S
CRUTINY BY
AD
S
...................................................................................... 143.5
 
A
LL
-
IN
-C
OST
C
EILING
.................................................................................. 153.6
 
E
ND
U
SE
(P
ERMITTED
) ................................................................................ 153.7
 
E
ND
U
SE
(N
OT
-
 
P
ERMITTED
) ....................................................................... 173.8
 
G
UARANTEES
............................................................................................. 173.9
 
S
ECURITY
................................................................................................... 173.10
 
P
ARKING OF
ECB
PROCEEDS
..................................................................... 203.11
 
P
RE
-P
AYMENT
.......................................................................................... 203.12
 
R
EFINANCING OF
L
OAN
.............................................................................. 213.13
 
H
OW
T
O GET
ECB .................................................................................... 213.14
 
V
ALIDITY OF
A
PPROVAL
............................................................................. 21
4. B
ENEFITS
........................................................................................................ 22
 
5. T
ARAPORE
C
OMMITTEE
R
ECOMMENDATIONS
..................................................... 22
6. R
ECENT
T
RENDS
............................................................................................. 23
 
7. P
ROJECT
F
INANCING
........................................................................................ 24
8. D
OCUMENTATION
............................................................................................. 25
 
 
 
Introduction
External Commercial borrowavailed from non-resident lefollowing forms:
Bank loans
Buyers credit
Suppliers credit
Securitized instrumentA company is free to raisebanks
, export credit agenforeign equity-holders, int
unrecognized sources are notECB can be accessed underAutomatic RouteApproval Route.
Automatic Route:
 
Under the Automatic Route, tIndia (RBI) or the GovernmeHowever, in case of doubt rmay take recourse to the App2.1
Eligible Borrowers:
 Corporates including tthe Companies Act, 1ing (ECB) is a term used to refer to coders with a minimum average maturity of(e.g. floating rate notes and fixed rate bonCB from any internationally recognized
ies, suppliers of equipment, foreignernational capital markets
etc. Howeventertained.wo routes -:e approval of Reserve Bank ofnts approval are not required.garding eligibility under the Automatic Rroval Route.ose in hotel, hospital, software sectors (r956
except financial intermediaries
, s
 
AuRoApRo
ECBRoute
3
 
mercial loans3 years in theds).ource such as
collaborators,
er, offers fromute, applicantsgistered underuch as banks,
o
 
maticterovalte

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