28-03-2022

EXTERNAL COMMERCIAL
BORROWINGS

CA MAYUR AGARWAL

RBI

Equity Debt
Finance Finance

Foreign Direct Investment External Commercial Borrowing

CA MAYUR AGARWAL

CA Mayur Agarwal
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CONCEPT OF ECB
ELIGIBLE Borrower

Eligible Lender

Automatic Route Approval Route

CA MAYUR AGARWAL

TWO OPTIONS

Foreign Currency Denominated ECB Indian Rupee Denominated ECB

Currency of Currency of
Borrowing Borrowing

Freely Convertible Indian Rupee (INR)

Foreign Currency

CA MAYUR AGARWAL

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FOREIGN CURRENCY DENOMINATED ECB

Forms and Types

Loans from Bank Foreign Currency Trade Credit

(Fixed or Floating Convertible Bonds (Beyond 3 years)
rate)

Debenture Financial lease

Foreign Currency
(Other then fully convertible Exchangeable Bonds
debentures)

CA MAYUR AGARWAL

INDIAN CURRENCY DENOMINATED ECB

Forms and Types

Loans from Bank Trade Credit Financial lease

(Fixed or Floating rate) (Beyond 3 years)

Bonds/Debenture /Preference/Bonds Plain Vanilla Bond

(Other then fully convertible (Rupee
debentures) denominated)

CA MAYUR AGARWAL

CA Mayur Agarwal
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FOREIGN CURRENCY DENOMINATED ECB

Eligible
Borrower

Entities eligible to Units in SEZ EXIM Bank of

receive FDI India

Port Trust SIDBI

CA MAYUR AGARWAL

INDIAN CURRENCY DENOMINATED ECB

Eligible Borrower

Entities eligible to Units in SEZ EXIM Bank of Registered Entities in

receive FDI India Micro Finance Activities

1) Registered NGO
Companies
2) Registered Trust
Port Trust SIDBI 3) Registered Society
4) Micro Finance
Activities

CA MAYUR AGARWAL

CA Mayur Agarwal
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RECOGNISED LENDERS

Resident of Multilateral and Regional Individual Foreign branches/subsidiaries

Financial Institutions of Indian Bank
Financial Action
Task Force

Resident of
Foreign Equity Bond Debentures
Holder
International Organisation of
Securities Commission
(IOSCO)

CA MAYUR AGARWAL

ALL IN COST CEILING PER ANNUM

Includes Does not Includes

Commitment Fees

Rate of Other Expenses Charges Guarantee ECA

Interest Fees Fees Charges
Withholding tax payable

Other Cost

Foreign Processing Fees for

Hedging Fluctuation TDS on
Fees unused
Fees loss interest as
credit
ECB
CA MAYUR AGARWAL

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ALL IN COST CEILING PER ANNUM

Benchmark 450 bps

All in Cost
Ceiling
= Rate + spread

Foreign Currency Indian Rupee

Denominated ECB Denominated ECB

LIBOR EURIBOR Yield on government

Securities

CA MAYUR AGARWAL

ALL IN COST CEILING PER ANNUM

Issue related
Expenses

FCCB Private Placement

Should not exceed

Should not exceed
4 % of issue size
2 % of issue size

CA MAYUR AGARWAL

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OTHER COST

Prepayment Penal Interest

Charges
Default or Breach
of covenants

Not above 2 % over and above

the contracted rate of interest

Other cost is outside the all- in cost ceiling

CA MAYUR AGARWAL

MINIMUM AVERAGE MATURITY PERIOD(MAMP)

ECB raised by ECB raised for Working Capital, ECB for

Manufacturing General Corporate Purpose Repayment of
Companies Rupee Loan

Upto USD 50 Exceeds USD 50

Million per FY Million per FY Foreign Equity From From
Holder NBFC Others

1 Year 3 Year
5 Years 10 Years 10 Years

MINIMUM AVERAGE MATURITY PERIOD(MAMP)= 3 years

CA MAYUR AGARWAL

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ECB for Repayment of Rupee Loan

From Foreign Equity NBFC From Others

Holders

5 Years
Rupee Loan
obtained for

Capital Expenses For other than Capital Expenses

7 Years 10 Years
CA MAYUR AGARWAL

END USE-Negative List

Real Estate Investment in Equity

Activities Capital market Investment

Working Capital General Corporate Repayment of Rupee On lending

purpose Purpose Loan
Exceptions

Exceptions Exceptions Exceptions Working capital-

10 years
Foreign Equity Holder- Foreign Equity Holder- Capital Expenses
5 years 5 years 7 years Capital Expenses
7 years
NBFC- 10 years NBFC- 10 years Other than Capital
Expenses- 10 years Other
CA than Capital
MAYUR AGARWAL
Expenses- 10 years

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CHANGE OF CURRENCY OF BORROWING

Freely Convertible Indian Rupee

Foreign Currency

Change of
Change of currency to
currency to

Freely Convertible
Foreign Currency
Other Freely Indian Rupee
convertible
Foreign Currency
Not Permitted

CA MAYUR AGARWAL

Limit and Leverage

Eligible Borrow under Approval Route

Automatic Route

Limit as per approval

USD 750 million

Indian Rupee Foreign Currency

Denominated ECB Denominated ECB

Outstanding Loan
Rule not
Less than USD 5
applicable
Others Foreign Direct million or equivalent
ECB: Equity
Equity Holders 7:1

Outstanding Loan
more than USD 5 CA MAYUR AGARWALRule
million or equivalent applicable

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PARKING OF ECB PROCEEDS

Parking of ECB Parking of ECB

proceeds abroad proceeds in India

ECB for Rupee

Deposit/ Treasury Bills/ Other Foreign Expenses
Certificate of Deposit Instruments branch/Subsidiary of Repatriated to India
Indian Branch

AD Category I Bank
Credit Rating

S&P Fitch IBCA Moody’s Account Deposit Term Deposit with

maximum period
12 months
AA- AA- Aa3
CA MAYUR AGARWAL
Unencumbered

PROCEDURE FOR RAISING ECB

Automatic Route

Application in FORM -ECB

AD Category 1 Bank
Eligible Borrower

CA MAYUR AGARWAL

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PROCEDURE FOR RAISING ECB

Approval Route

Application in
FORM -ECB

Setup Empowered
Eligible Borrower AD Category 1 Bank
Committee

Consist of Internal and

External Members
Final Decision

CA MAYUR AGARWAL

HEDGING PROVISION

Infrastructure Space Companies

Risk Management Policy-BOD

Hedging

AMP< 5 years AMP > =5 years

Hedging Mandatory Hedging Optional

Hedge minimum 70% of ECB exposure

AD Category I bank will verify hedging

requirement and report to RBI through Form ECB 2 CA MAYUR AGARWAL

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HEDGING PROVISION

Coverage Tenure and Rollover Natural Hedge

Minimum tenor of 1 Forex FC

Both Principal Should start from Revenue > ECB
year for the
and Interest the day the liability
financial hedge
is created in the (Inflow- (liability)
would be required
books of the Outflow)
borrower
Do Constant
Rollover

ECB should not be

unhedged at any
point of time

CA MAYUR AGARWAL

REPORTING REQUIREMENTS

Loan Registration Number (LRN) Changes in terms and Monthly reporting of

conditions of ECB Actual Transaction
Form ECB(duplicate
File Revised Form ECB Borrower
AD Category 1

File with DSIM File Form ECB 2

Forward 1 copy to Director, RBI Returns
(Department of Statistics and
Information Division)
(Department of Statistics and
Information Division) AD Category 1
Changes Should be
specifically mentioned
They will GIVE LRN Forward to DSIM

File within 7 days

File within 7 days

CA MAYUR AGARWAL

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REPORTING REQUIREMENTS

Late Submission Fee(LSF) Standard Operating Procedure(SOP)

for Untraceable Entities
Pay the prescribed Late Fees
Untraceable Entities

Entity Auditor Director Promotor

Not reachable/responsive/reply to the Communication with AD Category I

Not less than & 6 Communication

2 quarters

CA MAYUR AGARWAL

REPORTING REQUIREMENTS

Not reachable/responsive/reply to the Communication with AD Category I

Not less & 6 Communication

than 2
quarters

+
2 Conditions

Not found operative at No Auditors Certificate

Registered Office is fixed for 2 or more
Address years

CA MAYUR AGARWAL

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ACTION ON UNTRACEABLE ENTITIES

File Return No Fresh Inform to No Inward

Application Directorate remittance or Debt
Enforcement servicing will be
File revised Form ECB permitted under
No fresh ECB application automatic route
and last Form ECB 2
by the entity shall be
returns without
processed by AD Bank
certification from
company with
“UNTRACEABLE ENTITY”
written on top in bold

CA MAYUR AGARWAL

ECB FACILITY FOR OIL MARKETING COMPANIES

Automatic Route Approval Route

ECB as per
approval
MAMP Overall Ceiling No Mark to Market
Minimum Average Hedging Procedure
Maturity Period USD 10 billion or
equivalent
3 years

CA MAYUR AGARWAL

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ECB FACILITY FOR START-UPS

ECB as per
Approval Route
Automatic Route approval

MAMP Amount Eligibility ALL in cost

Minimum Average
Maturity Period USD 3 million or Recognised as Shall be mutually
equivalent per F.Y startup by CG agreed by
3 years borrower and
lender

CA MAYUR AGARWAL

ECB FACILITY FOR START-UPS

Automatic Route

Conversion Rate Security End Use Currency Conversion into

Equity
Market rate on Choice is left to For any Can be in Free
date of agreement borrowing entity expenditure in convertible Freely permitted
connection with foreign currency subject to
business or INR regulation

CA MAYUR AGARWAL

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Conversion of ECB into Equity

Activity of Borrowing Lenders Consent Pricing Guidelines

Company
Lenders Consent with no Pricing guidelines of shares
Activity of Borrowing Company additional cost of conversion must be complied with
is covered under FDI

No breach eligibility and

applicable sectoral cap as per
FDI policy

CA MAYUR AGARWAL

Conversion of ECB into Equity

Reporting to RBI Conversion Prudential

Rate Guidelines

Partial Full Conversion in Foreign Fair Value of

Conversion Conversion Phases Exchange Equity Department
Rate of Banking
Regulation
of RBI
Form FC-GPR Form FC-GPR Form FC-GPR
+ + Fair value
+ Rate
Form ECB 2 Form ECB 2 on date of
Form ECB 2 prevailing conversion
on date of
agreement
Subsequently All filing will
filing of ECB 2 also in phases
return not
required CA MAYUR AGARWAL

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SECURITY FOR RAISING ECB

Creation of Charge on Immovable Property

Immovable Property have Oversea lender no Sale Proceeds shall be

to be sold only to Person permission to acquire repatriated to liquidate
Resident in India immovable property the outstanding ECB

Security shall be subject to provisions contained in the Foreign Exchange Management (Acquisition
and Transfer of Immovable Property in India) Regulations, 2017, as amended from time to time.

CA MAYUR AGARWAL

SECURITY FOR RAISING ECB

Creation of Charge on Movable Property

Take over Restricted to Encumbered movable

Movable Asset Outstanding Claim asset can be taken
outside the country

CA MAYUR AGARWAL

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SECURITY FOR RAISING ECB

Creation of Charge on Financial Securities

Shares Debentures Government Saving Units of Mutual

Certificate Fund

Bond Government Deposit Receipts

Securities

CA MAYUR AGARWAL

SECURITY FOR RAISING ECB

Issue of Corporate and Personal Guarantee

Corporate Personal Regulation

Guarantee Guarantee

Foreign Exchange
Copy of Board Specific requests from Management
Resolution for issue of individuals to issue (Guarantees)
corporate guarantee personal guarantee Regulations, 2000,

CA MAYUR AGARWAL

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BORROWING BY ENTITITES UNDER INVESTIGATION

Intimate to AD Can raise ECB Intimation to Law

Category 1 bank Enforcing Agency

The borrowing entity shall Can raise ECB not AD Category I/ RBI shall
inform about pendency of withstanding the pending intimate to law enforceing
investigation/Adjudication/ investigations/ adjudication/ agency by endorsing a copy
Appeals appeals of the approval letter

CA MAYUR AGARWAL

ENTITIES UNDER RESTRUCTING

ECB FACILTIES FOR REFINANCING SRESSED ASSET

Entity under CIRP MAMP

Sale of NPA

Can raise ECB only if Lender banks are also The applicable MAMP will
permitted under the permitted to sell have to be strictly complied
resolution plan with under all
circumstances.

Rupee loan classified Ineligibility

as NPA or SMA-2

Foreign branches/
Can avail ECB for overseas subsidiaries of
repayment of these loans Indian banks are not
under any one time eligible to lend for the
settlement with lenders above purposes. CA MAYUR AGARWAL

CA Mayur Agarwal
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