TMI BlogForeign Exchange Management (Borrowing and Lending) Regulations, 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... he Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. ii) They shall come into force from the date of their publication in the Official Gazette. 2. Definitions: - In these regulations, unless the context otherwise requires - i) Act means the Foreign Exchange Management Act, 1999 (42 of 1999); ii) Authorised Dealer (AD) means a person authorised as an Authorised Dealer under sub-section (1) of section 10 of the Act; iii) EEFC Account , RFC Account shall have the same meaning as assigned to them respectively in the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015 , as amended from time to time; iv) External Commercial Borrowings (ECB) means borrowing by an eligible resident entity from outside India in accordance with framework decided by the Reserve Bank in consultation with the Government of India; v) External Commercial Lending (ECL) means lending by a person resident in India to a borrower outside India in accordance with framework decided by the Reserve Bank in consultation with the Government of India vi) Foreign Exchange shall have the same meaning assign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in Transferrable Development Rights (TDR), where TDR shall have the meaning as assigned to it in the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2015. xv) Schedule means the Schedule to these Regulations; xvi) Start-up means an entity which complies with the conditions laid down in Notification No. G.S.R 180(E) dated February 17, 2016, as amended/ updated from time to time, issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India; xvii) Trade Credit refer to the credits extended by the overseas supplier, bank /financial institution for imports into India in accordance with the Trade Credit framework decided by the Reserve Bank in consultation with the Government of India; Explanation: Depending on the source of finance, such trade credits include both suppliers credit and buyers credit. Suppliers credit relates to the credit for imports into India extended by the overseas supplier, while buyers credit refers to loans for payment of imports into India arranged by the importer from overseas bank or financial institution. Imports should be as permissible under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the provisions contained in Schedule I. ii) Trade Credit may be raised from outside India by importers for import of capital or non-capital goods as permissible under the extant Foreign Trade Policy of the DGFT in accordance with the provisions contained in Schedule II. iii) A person resident in India may borrow, whether by way of loan or overdraft or any other credit facility, from a bank situated outside India, where export of goods or services is proposed to be made on deferred payment terms or in execution of a turnkey project or a civil construction contract, provided the terms and conditions stipulated by the authority which has granted the approval to the arrangement are in accordance with the Foreign Exchange Management (Export of goods and services) Regulations, 2015 , notified vide Notification No. FEMA.23(R)/2015-RB dated January 12, 2016 , as amended from time to time. iv) Financial Institutions, set up under an Act of the Indian Parliament, may raise foreign exchange borrowings with the prior approval of the Government of India for the purpose of onward lending. Explanation : Such borrowings, which are in the nature of ECB, shall be subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provisions contained in Schedule I. B. Borrowing by persons other than Authorised Dealer i. Eligible resident entities may raise Rupee denominated ECB from outside India in accordance with the provisions contained in Schedule I. ii. Eligible resident entities, as defined by the Government of India, may borrow from overseas Multilateral Financial Institutions/International Development Financial Institutions, where the source of funds of such institutions is Rupee denominated bonds issued overseas or resources raised domestically, or any other source as approved by the Government of India. iii. Trade Credit may be raised from outside India in Indian Rupees by importers for import of capital or noncapital goods as permissible under the extant Foreign Trade Policy of the DGFT in accordance with the provisions contained in Schedule II. iv. Any foreign investment in the nature of debt arising out of transfer or issue of security, not covered under the above sub-regulations, should be in compliance with Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 , notified vide Notification No. FEMA 20(R)/ 2017- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as may be specified by the Reserve Bank from time to time, may provide housing loan or vehicle loan, as the case may be, to a NRI/OCI Cardholder subject to such terms and conditions as prescribed by the Reserve Bank from time to time. The borrower should ensure that the borrowed funds are not used for restricted end uses. ii) An Indian entity may grant loan in Indian Rupees to its employee who is a NRI/OCI Cardholder in accordance with the Staff Welfare Scheme subject to such terms and conditions as prescribed by the Reserve Bank from time to time. The borrower should ensure that the borrowed funds are not used for restricted end uses. iii) A resident individual may grant Rupee loan to a NRI/OCI Cardholder relative within the overall limit under the Liberalised Remittance Scheme subject to such terms and conditions as prescribed by the Reserve Bank from time to time. The borrower should ensure that the borrowed funds are not used for restricted end uses. 8. Continuation of loan in the event of change in the residential status of the lender/borrower: i) An authorised dealer/authorised bank, may allow continuance of loans granted to a resident individual who subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017, notified vide Notification No. FEMA 20(R)/ 2017-RB dated November 07, 2017, as amended from time to time, including Start-ups. Further, Reserve Bank, in consultation with the Government of India may specify any other entity/sector eligible to raise ECBs or amend the existing eligibility norms. 4. Maturity Minimum average maturity will be 3 years. However, Reserve Bank, in consultation with Government of India may prescribe minimum average maturity stipulation for ECBs raised by entities in certain sectors or for certain amount of ECB or for certain end uses or for borrowing from certain recognised lenders. 5. Lenders: The lender should be resident of FATF or IOSCO compliant country as defined in the ECB policy, including on transfer of ECBs. However, Multilateral and Regional Financial Institutions where India is a member country will also be considered as recognised lenders. Further, Reserve Bank, in consultation with the Government of India may specify any other lender/set of lenders under the schedule or amend the existing provisions. Explanation: Foreign branches / subsidiaries of Indian banks are permitted as recognised lenders only for ECBs raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be made only after obtaining the loan registration number from the Reserve Bank or from the ADs, as per the system put in place by the Reserve Bank. For non-adherence, the borrower may be required to pay penalty as specified by the Reserve Bank from time to time. Provided that non-payment of penalty as above shall be treated as a contravention and shall be subject to compounding or adjudication as provided in the Act or Rules framed thereunder. 12. Reporting The borrower shall adhere to the reporting procedure as specified by the Reserve Bank from time to time. For nonadherence, the borrower may be required to pay penalty as specified by the Reserve Bank from time to time. Provided that non-payment of penalty as above shall be treated as a contravention and shall be subject to compounding or adjudication as provided in the Act or Rules framed thereunder. 13. Debt Servicing The designated AD shall have the general permission to make remittances of principal, interest and other charges in conformity with the guidelines on borrowing under this Schedule. 14. Hedging Reserve Bank, in consultation with the Government of India, may stipulate hedging re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve currency will be 250 basis points per annum or as prescribed by the Reserve Bank in consultation with the Government of India. ii. For Rupee denominated trade credit, the all-in-cost shall be commensurate with prevailing market conditions or as prescribed by the Reserve Bank in consultation with the Government of India. 7. Security and guarantee The borrower covered in this Schedule may provide security to the lender / suppliers, as specified by the Reserve Bank from time to time in terms of these regulations or under any other Regulations framed under the Act. The borrower may also provide corporate and / or personal guarantee as security for the borrowing subject to terms and conditions as specified by the Reserve Bank from time to time. Further, AD Category I banks are permitted to issue bank guarantees in favour of overseas supplier, bank or financial institution duly ensuring the underlying import /trade credit complies with extant norms. 8. Reporting requirements The reporting requirement and procedure will be as specified by the Reserve Bank from time to time. SCHEDULE III [See Regulations 5(A)(i), 5(B)] Lending to borrowers outside India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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