FORMS OF ECB :
The ECB Framework enables permitted resident entities to borrow from recognized non-resident entities in the following forms:
1. Loans including bank loans;
2. Securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares / debentures);
3. Buyers’ credit;
4. Suppliers’ credit;
5. Foreign Currency Convertible Bonds (FCCBs);
6. Financial Lease; and
7. Foreign Currency Exchangeable Bonds (FCEBs)
However, ECB framework is not applicable in respect of the investment in Non-convertible Debentures (NCDs) in India made by Registered Foreign Portfolio Investors (RFPIs)
The ECBs are classified under three ‘Tracks’ under the new framework:
| Track I
(ECB in FCY over 3/5 avenge maturity) |
Track II
(ECB in FCY over 10 years average maturity) |
Track III
(ECB in INK) |
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| Minimum Average Maturity | ||||
| • Up to USD 50 mn (earlier USD 20 mn): 3 years
• Beyond USD 50 mn: 5 years
• 5 years for eligible borrowers irrespective of the amount of borrowing.
• 5 years for FCCB/FCEBs irrespective of the amount of borrowing. The call and put option, if any, for FCCBs shall not be exercisable prior to 5 years. |
10 years, irrespective of amount | • Same as Track I | ||
| Eligible Borrowers | ||||
| • Companies in following sectors:
o Manufacturing sector o Software development o Shipping and airlines companies
• Units in SEZs
• Small Industries and Development
• Exim Bank (approval route)
• Companies in infrastructure sector NBFCs–IFCs, NBFCs – Assets Finance companies, Holding companiesand core Investment Companies(CICs)
|
• All entities under Track I
• Companies in infrastructure sector (definition aligned with Harmonised Master List of Government of India)
• Holding companies
• Core investment companies
• REITs and INVTTs registered with SEBI |
• All entities listed under Track II
• All NBFCs coming under the regulatory purview of the RBI
• Entities engaged in micro finance activities, subject to conditions
• Companies in Miscellaneous Services, viz. o R&D o Training (excluding educational institutes) o Companies supporting infrastructure o Logistic services
• SEZs/NMIZs Developers |
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Exchange Commercial Borrowings (ECB) Policy – Revised Framework published vide A.P. (DIR Series) Circular No. 32 dated 30th November 2015
Recognised lenders
| • International banks
• Intemational capital market: • Multilateral financial institutions/ regional financial institutions and government owned financial institutions • Export credit agencies • Suppliers of equipment • Foreign equity holders • Overseas long-term Investors such as:
– prudentially regulated financial entities
– Pension funds
– Insurance companies
– Sovereign Wealth Funds
– Financial institutions
located International Financial Services Centres in India • Overseas branches/subsidiaries of Indian bank |
• All entities listed under Track I but for overseas branches/ subsidiaries of Indian bank | • All entities listed under Track I but for overseas branches/ subsidiaries of Indian bank
• In case of NBFCs-MFIs, other eligible MFIs not for profit companies and NGOs, ECB can also be availed from overseas organisation and individual satisfying prescribed conditions. |
| All-in-Cost Ceiling (AIC) | ||
| • Average maturity of 3-5 years 300 bps over the 6-month LIBOR
• Average maturity of above 5 years: 450 bps over the 6-month LIBOR • Penal interest: Maximum 2% over and above contracted interest rate |
• Maximum spread of 500 bps per annum over the benchmark has been prescribed. | • In line with the market conditions |
| Permitted end-users: | ||
| • Capital expenditure in the form of :
o Import of capital goods; (including for services; technical know-how and license fees, provided they are part of these capital goods) o Local sourcing of capital goods: o New projects o Modernisation/expansion of existing units o Investment in joint ventures (JV)/wholly-owned subsidiaries (WOS) overseas o Acquisition of shares of PSUs under the disinvestment prog- ramme of Government of India o Refinancing of existing trade credit raised for import of capital goods already shipped/imported not unpaid;
o Refinancing of existing ECB provided residual maturity is not reduced. • SIDBI – only for the purpose of onlending to borrowers in the MSME sector • Units of SEZs – only for their ovvn requirements, • Shipping and airlines companies – only for import of vesels and aircrafts respectively • For general corporate purpose (including vvorking capital), provided the ECB is raised from direct/indirect equity holder or from a group company; for a minimum average maturity of 5 years, • ECEs under the approval route:
o Import of second-hand good; as per DGFT guidelines
o On-lending by Exim Bank |
• Any end-use other than the following:
o Real estate activities o Investing in capital market o Using proceeds for equity investment domestically o On-lending to other entries with any of the above objective; o Purchase of land |
• Any end-use other than the following :
o Real estate activities o Inverting in capital market o Using the proceeds for equity investment domestically o On-lending to other entities with any of the above objectves o Purchase of land proceeds for: • SEZs/NMIZs Developers Only for providing infrastructure facilities within SEZ/NMIZ • NBFCs can use ECB proceeds for:
o On-lending for any activities including infrastructure sector as permitted by the concerned regulatory department of RBI
o Hypothecated loans to domestic entities for acquisition of capital goods/ equipment
o Providing capital goods/ equipment to domestic entities by way of lease hire-purchase • Entities in micro-finance sector – Only for on-lending to self-help groups or for micro-credit or for bona fide micro-finance activity including capacity building
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