External Commercial Borrowings (ECB) and Trade Credits - As on Jun 26, 2023

Chapters / List

1. Where can one get the details of extant External Commercial Borrowings (ECB) and Trade Credits (TC) framework?

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2. Do FCNR (B) loans given by AD Category I banks come under the ECB framework?

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3. What precautions have to be taken before raising loan from non-residents?

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4. Whose responsibility is it to ensure compliance with ECB guidelines?

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5. Are LLPs eligible to raise ECBs?

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6. Can INR denominated ECB be converted into foreign currency ECB?

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7. Is the minimum equity holding requirement of foreign equity holder (direct/indirect) applicable where the end uses is other than general corporate purpose/working capital/repayment of Rupee loans?

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8. A foreign equity holder holding minimum 25% direct equity holding in the borrowing entity or minimum indirect equity holding of 51% in the borrowing entity is a recognised lender. Can the foreign equity holder dispose-off the holding once ECB is contracted?

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9. Can Indian banks participate in the process of issuance of Rupee denominated bonds overseas in any other manner?

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10. Can persons resident in India subscribe to bonds (foreign currency/INR) issued by eligible ECB borrowers in overseas centres or IFSCs as permitted in the ECB framework?

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11. Individuals can be recognised lenders if they are foreign equity holders or for subscription to bonds/debentures listed abroad. Should such lenders also be from FATF/IOSCO compliant jurisdictions?

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12. How is average maturity period calculated?

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13. Can door-to-door maturity be used in lieu of average maturity?

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14. In case of an ECB raised from foreign equity holder and utilized for general corporate purpose/working capital/repayment of Rupee loans, can repayment of principal of ECB start before the completion of 5 years?

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15. Should the proposed ECB be added to all outstanding ECBs for the purpose of ECB liability to equity ratio?

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16. Does the equity in “ECB liability to Equity ratio” include non-convertible preference capital?

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17. Should the proposed ECB be added to all outstanding ECBs for arriving at the individual limit for raising of ECBs?

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18. Is the debit balance in the profit and loss account for losses incurred by the Eligible Borrower, if any, required to be deducted from the free reserve while calculating the ECB liability-equity ratio?

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19. Can an eligible borrower simultaneously raise both Foreign Currency and INR denominated ECBs?

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20. Is the enhancement of ECB amount permitted under the delegated powers?

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21. Does all-in-cost ceiling apply on a continuous basis or can it be calculated even on an average basis?

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22. Can interest during construction stage be paid out of ECB borrowings?

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23. Is the reimbursement of expenditure incurred in the past a permissible end-use under the ECB framework?

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24. Can ECB be availed of for making equity investment domestically or buying goodwill?

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25. Can ECB be availed of for making contribution in an LLP?

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26. Can an eligible borrower raise fresh foreign currency ECB for repayment of existing Rupee denominated ECB?

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27. Can ECB proceeds be used by eligible resident borrowers for investment in their overseas JV/WOS as per the extant overseas investment guidelines?

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28. Is on-lending treated as working capital for borrowers who are engaged in the business of on-lending?

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29. Can the housing finance companies raise ECB for on-lending to individual borrowers exclusively for flats/units in the affordable housing projects as defined in Harmonised Master List of Infrastructure Sub-sectors notified by Government of India?

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30. Can ECB raised under the earlier ECB framework be refinanced/ partially refinanced through an ECB raised under extant ECB framework?

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31. Can refinancing/ partial refinancing be undertaken under auto route even for ECBs raised under approval route, subject to compliance with guidelines?

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32. Is refinancing of ECBs raised from foreign equity holders and utilised for working capital/ general corporate purpose/ repayment of Rupee loans permitted?

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33. Can an entity raising INR ECB including issuance of Rupee denominated bonds overseas, assume foreign currency risk on account of liabilities arising out of such ECBs?

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34. Can the existing hedge(s) for ECBs be rolled over to the extent of 100 per cent of outstanding ECB exposure?

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35. What are the permitted derivative products for hedging of ECB?

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36. What precautions have to be taken at the time of filing of Form ECB in respect of an ECB?

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37. How are actual transactions of an ECB reported to RBI?

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38. In light of the New ECB framework, does the borrower need to file revised Form ECB?

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39. Is LSF applicable to old ECB 2 returns also?

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40. Is LSF applicable for each Form ECB 2 and to nil returns as well?

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41. Can the interest accrued on ECB be converted into Equity under the extant norms?

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42. When ECB is partially converted into equity, should the remaining ECB amount comply with all the ECB guidelines?

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43. Can fixed deposits created out of ECB proceeds, pending utilization, be renewed after completion of maximum permitted period?

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44. Can SBLC be issued by AD banks on behalf of their customers for availing short term trade finance from overseas lenders in foreign currency?

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45. As per the new guidelines AD banks are required to report permissions granted for settlement of delayed import dues as per the applicable procedure. AD banks are also required to report permissions granted for settlement of delayed import dues by Regional offices of Reserve Bank on a similar basis. Is the mandated reporting only for approvals accorded for extensions up to one year/three years for non-capital/capital goods respectively?

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