TMI BlogMaster Direction - External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised DealersX X X X Extracts X X X X X X X X Extracts X X X X ..... d Dealers and Persons other than Authorised Dealers Transactions on account of External Commercial Borrowings (ECB) and Trade Credit are governed by clause (d) of sub-section 3 of section 6 of the Foreign Exchange Management Act, 1999 (FEMA). Various provisions in respect of these two types of borrowings from overseas are included in the following three Regulations framed under FEMA: Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 , notified vide Notification No. FEMA 3/2000-RB dated May 3, 2000; Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 , notified vide Notification No. FEMA 120/2004-RB dated July 07, 2004 ; and Foreign Exchange Management (Guarantees) Regulations, 2000 , notified vide Notification No. FEMA 8/2000-RB dated May 03, 2000. These Regulations are amended from time to time to incorporate the changes in the regulatory framework and published through amendment notifications. 2. Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Operational aspects on hedging 2.6 Security for raising of ECB 2.6.1 Additional Conditions 2.6.1.1 Creation of Charge on Immovable Assets 2.6.1.2 Creation of Charge on Movable Assets 2.6.1.3 Creation of Charge over Financial Securities 2.6.1.4 Issue of Corporate or Personal Guarantee 2.7 Issuance of Guarantee, etc. by Indian banks and Financial Institutions 2.8 Debt Equity Ratio 2.9 Parking of ECB proceeds 2.9.1 Parking of ECB proceeds abroad 2.9.2 Parking of ECB proceeds domestically 2.10 Conversion of ECB into equity 2.10.1 Exchange rate for conversion of ECB dues into equity 2.11 Procedure of raising ECB 2.12 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.23.11 Corporate and personal guarantee 2.23.12 Hedging 2.23.13 Conversion rate 2.23.14 Other provisions 2.24 ECB facility for Oil Marketing Companies 3 Framework for issuance of Rupee denominated bonds overseas 3.1 Form of borrowing 3.2 Available routes and limits of borrowing 3.3 Parameters of borrowing by issuance of Rupee denominated bonds 3.3.1 Minimum Maturity 3.3.2 Eligible borrowers 3.3.2.1 3 Indian banks as eligible borrowers 3.3.3 Recognised Investors 3.3.4 All-in-Cost 3.3.5 End-use Prescriptions 3.3.6 Exchange Rate for conversion 3.3.7 Hedging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y AIC: All-in-Cost AMP: Average Maturity Period BSE: Bombay Stock Exchange CDC: Commonwealth Development Corporation CIC: Core Investment Company COD: Commercial Operation Date DEPR: Department of Economic and Policy Research DSIM: Department of Statistics and Information Management DTA: Domestic Tariff Area ECB: External Commercial Borrowings FATF: Financial Action Task Force FCCB: Foreign Currency Convertible Bond FCEB: Foreign Currency Exchangeable Bond FCNR(B): Foreign Currency Non-Resident (Bank) FDI: Foreign Direct Investment FED: Foreign Exchange Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid in foreign currency or Indian Rupees (INR) but will not include commitment fees, pre-payment fees / charges, withholding tax payable in INR. In the case of fixed rate loans, the swap cost plus spread should be equivalent of the floating rate plus the applicable spread. 1.2 The term Close relative means a relative as defined under the Companies Act, 1956/2013: Act of 1956 Act of 2013 U/s 6: MEANING OF RELATIVE A person shall be deemed to be a relative of another, if, and only if, (a) they are members of a Hindu undivided family ; or (b) they are husband and wife ; or (c) the one is related to the other in the manner indicated in Schedule IA. U/s 2(77) relative , with reference to any person, means anyone who is related to another, if- (i) they are members of a Hindu Undivided Family; (ii) they are husband and wife; or (iii) one person is related to the other in such manner as may be prescribed. Schedule IA As prescribed Father Father (including step-father) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to foreign currency denominated instruments which are issued in accordance with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 as amended from time to time. 1.6 The term Foreign Currency Exchangeable Bonds (FCEBs) refers to foreign currency denominated instruments which are issued in accordance with the Issue of Foreign Currency Exchangeable Bonds Scheme, 2008. 1.7 The term Foreign Equity Holder means (a) direct foreign equity holder with minimum 25% direct equity holding by the lender in the borrowing entity, (b) indirect equity holder with minimum indirect equity holding of 51%, and (c) group company with common overseas parent. 1.8 The term Infrastructure Sector has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by Government of India vide Notification F. No. 13/06/2009-INF dated March 27, 2012 as amended / updated from time to time. 4 For the purpose of ECB, Exploration, Mining and Refinery sectors which are not included in the Harmonised list of infrastructure sector but were eligible to take ECB under the previous ECB framework (c.f. A.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares / debentures); Buyers credit; Suppliers credit; Foreign Currency Convertible Bonds (FCCBs); Financial Lease; and Foreign Currency Exchangeable Bonds (FCEBs) 7 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). 2.3 Available routes for raising ECB: Under the ECB framework, ECBs can be raised either under the automatic route or under the approval route. For the automatic route, the cases are examined by the Authorised Dealer Category-I (AD Category-I) banks. Under the approval route, the prospective borrowers are required to send their requests to the RBI through their ADs for examination. While the regulatory provisions are mostly similar, there are some differences in the form of amount of borrowing, eligibility of borrowers, permissible end-uses, etc. under the two routes. While the first six forms of borrowing, mentioned at 2.2 above, can be raised both under the automatic and approval routes, FCEBs can be issued only under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Micro Finance Institutions (NBFCs-MFIs), Not for Profit companies registered under the Companies Act, 1956/2013, Societies, trusts and cooperatives (registered under the Societies Registration Act, 1860, Indian Trust Act, 1882 and State-level Cooperative Acts/Multi-level Cooperative Act/State-level mutually aided Cooperative Acts respectively), Non-Government Organisations (NGOs) which are engaged in micro finance activities 1 . Companies engaged in miscellaneous services viz. research and development (R D), training (other than educational institutes), companies supporting infrastructure, companies providing logistics services. 15 Also, companies engaged in maintenance, repair and overhaul and freight forwarding. Developers of Special Economic Zones (SEZs)/ National Manufacturing and Investment Zones (NMIZs). Notes: 1. Entities engaged in micro-finance activities to be eligible to raise ECB: (i) should have a satisfactory borrowing relationship for at least three years with an AD Category I bank in India, and (ii) should have a certificate of due diligence on fit and proper status from the AD Category I bank. 2.4.3 Rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the bank for at least a period of two years. Other evidence /documents such as audited statement of account and income tax return, which the overseas lender may furnish, need to be certified and forwarded by the overseas bank. Individual lenders from countries which do not adhere to FATF guidelines on AML / CFT are not eligible to extend ECB. 2.4.4 All-in-Cost (AIC): The all-in-cost requirements for the three tracks will be as under: Track I Track II Track III 17 The all-in-cost ceiling is prescribed through a spread over the benchmark, i.e., 450 basis points per annum over 6 month LIBOR or applicable benchmark for the respective currency. Penal interest, if any, for default or breach of covenants should not be more than 2 per cent over and above the contracted rate of interest. 18 The maximum spread over the benchmark of 6 month LIBOR or applicable benchmark for the respective currency will be 450 basis points per annum. Remaining conditions will be as given under Track I. 19 The maximum spread w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the borrower (including all outstanding ECBs and the proposed one) towards the foreign equity holder should not be more than 24 seven times of the equity contributed by the latter. 25 This ratio will not be applicable if total of all ECBs raised by an entity is up to USD 5 million or equivalent. Notes 6. For the purpose of ECB liability: equity ratio, the paid-up capital, free reserves (including the share premium received in foreign currency) as per the latest audited balance sheet can be reckoned for calculating the equity of the foreign equity holder. Where there are more than one foreign equity holders in the borrowing company, the portion of the share premium in foreign currency brought in by the lender(s) concerned shall only be considered for calculating the ratio. 2.4.7 Currency of Borrowing: ECB can be raised in any freely convertible foreign currency as well as in Indian Rupees. Further details are given below: i. In case of Rupee denominated ECB, the non-resident lender, other than foreign equity holders, should mobilise Indian Rupees through swaps/outright sale undertaken through an AD Category I bank in India. ii. Change of currency of ECB f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets, financial securities and issue of corporate and/ or personal guarantees in favour of overseas lender / security trustee, to secure the ECB to be raised / raised by the borrower, subject to satisfying themselves that: the underlying ECB is in compliance with the extant ECB guidelines, there exists a security clause in the Loan Agreement requiring the ECB borrower to create charge, in favour of overseas lender / security trustee, on immovable assets / movable assets / financial securities / issuance of corporate and / or personal guarantee, and No objection certificate, as applicable, from the existing lenders in India has been obtained. 2.6.1 Additional conditions: Once aforesaid stipulations are met, the AD Category I bank may permit creation of charge on immovable assets, movable assets, financial securities and issue of corporate and / or personal guarantees, during the currency of the ECB with security co-terminating with underlying ECB, subject to the following: 2.6.1.1 Creation of Charge on Immovable Assets: The arrangement shall be subject to the following: Such security shall be subject to provisions contained in the Foreign Exchange Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on behalf of the company or in individual capacity should be obtained. Specific requests from individuals to issue personal guarantee indicating details of the ECB should be obtained. Such security shall be subject to provisions contained in the Foreign Exchange Management (Guarantees) Regulations, 2000. ECB can be credit enhanced / guaranteed / insured by overseas party/ parties only if it/ they fulfil/s the criteria of recognised lender under extant ECB guidelines. 2.7 Issuance of Guarantee, etc. by Indian banks and Financial Institutions: Issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort by Indian banks, All India Financial Institutions and NBFCs relating to ECB is not permitted. Further, financial intermediaries (viz. Indian banks, All India Financial Institutions, or NBFCs) shall not invest in FCCBs in any manner whatsoever. 2.8 Debt Equity Ratio: The borrowing entities will be governed by the guidelines on debt equity ratio issued, if any, by the sectoral or prudential regulator concerned. 2.9 Parking of ECB proceeds: ECB proceeds are permitted to be parked abroad as well as domestically in the manner given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or any lesser rate can be applied with a mutual agreement with the ECB lender. It may be noted that the fair value of the equity shares to be issued shall be worked out with reference to the date of conversion only. 2.11 Procedure of raising ECB: For approval route cases, the borrowers may approach the RBI with an application in prescribed format Form ECB for examination through their AD Category I bank. Such cases shall be considered keeping in view the overall guidelines, macroeconomic situation and merits of the specific proposals 32 . ECB proposals received in the Reserve Bank above certain threshold limit (refixed from time to time) would be placed before the Empowered Committee set up by the Reserve Bank. The Empowered Committee will have external as well as internal members and the Reserve Bank will take a final decision in the cases taking into account recommendation of the Empowered Committee. Entities desirous to raise ECB under the automatic route may approach an AD Category I bank with their proposal along with duly filled in Form 83. Formats of Form ECB and Form 83 are available at Annex I and II respectively of Part V of the Master Directions Reporting under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ECB 2 Return is not required. For conversion of ECB into equity in phases, reporting through ECB 2 Return will also be in phases. 2.13 Foreign Currency Convertible Bonds (FCCBs): The issuance of FCCBs was brought under the ECB guidelines in August 2005. Issuance of FCCBs shall conform to the Foreign Direct Investment guidelines including sectoral cap. In addition to the requirements of (i) minimum maturity of 5 years, (ii) the call put option, if any, shall not be exercisable prior to 5 years, (iii) issuance without any warrants attached, (iv) the issue related expenses not exceeding 4 per cent of issue size and in case of private placement, not exceeding 2 per cent of the issue size, etc. as required in terms of provisions contained in Regulation 21 of the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2000 read with Schedule I to the Regulations, FCCBs are also subject to all the regulations which are applicable to ECBs. 2.14 Foreign Currency Exchangeable Bonds (FCEBs): FCEBs can be issued only under the approval route and shall have minimum maturity of 5 years. The bonds are exchangeable into equity share of another compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strar of Companies/ appropriate authority. v. Transfer of ECB: Designated AD Category I banks may allow the cases requiring transfer of the ECB from one company to another on account of re-organisation at the borrower s level in the form of merger/ demerger/ amalgamation/ acquisition duly as per the applicable laws/ rules after satisfying themselves that the company acquiring the ECB is an eligible borrower. vi. Change in the recognized lender: Designated ADs Category I may approve the requests from the ECB borrowers for change in the recognized lender provided (a) the original lender as well as the new lender are recognised lender as per extant ECB guidelines and, (b) there is no change in the other terms and conditions of the ECB. If not, case has to be referred to the Foreign Exchange Department, Central Office, Reserve Bank of India, Mumbai. vii. Change in the name of Lender: Designated AD Category I banks may permit changes in the name of the lender of ECB after satisfying themselves with the bonafides of the transactions and ensuring that the ECB continues to be in compliance with applicable guidelines. viii. Prepayment of ECB: Prepayment of ECB may be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed powers, the AD Category I banks should ensure that: 40 The revised average maturity and / or all-in-cost is/are in conformity with the applicable ceilings / guidelines and the ECB continues to be in compliance with applicable guidelines. It should also be ensured that if the ECB borrower has availed of credit facilities from the Indian banking system, including overseas branches/subsidiaries, any extension of tenure of ECB (whether matured or not) shall be subject to applicable prudential guidelines issued by Department of Banking Regulation of RBI including guidelines on restructuring. The changes in the terms and conditions of ECB allowed by the ADs under the powers delegated and / or changes approved by the Reserve Bank should be reported to the DSIM/RBI through revised Form 83 at the earliest, in any case not later than 7 days from the changes effected. While submitting revised Form 83 to the DSIM/RBI, the changes should be specifically mentioned in the communication. Further, these changes should also get reflected in the ECB 2 returns appropriately. Notes: 7. Changes in the end-use of ECBs raised under the approval route will continue to be referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er should be initially communicated to the Principal Chief General Manager, Foreign Exchange Department, ECB Division, Reserve Bank of India, Central Office, Mumbai within seven days of approval and subsequently in ECB 2 Return. 2.22 ECB arrangements prior to December 02, 2015: Entities raising ECB under the framework in force prior to December 02, 2015 can raise the said loans by March 31, 2016 provided the agreement in respect of the loan is already signed by the date the new framework comes into effect. It is clarified that all ECB loan agreements entered into before December 02, 2015 may continue with the disbursement schedules as already provided in the loan agreements without requiring any further consent from the RBI or any AD Category I bank. For raising of ECB under the following carve outs, the borrowers will, however, have time up to March 31, 2016 to sign the loan agreement and obtain the LRN from the Reserve Bank by this date: ECB facility for working capital by airlines companies; ECB facility for consistent foreign exchange earners under the USD 10 billion Scheme; and ECB facility for low cost affordable housing projects (low cost affordable housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Special Purpose Vehicles (SPVs), which have completed at least one year of existence from the date of incorporation and do not have sufficient track record/past performance for three financial years, the maximum permissible ECB that can be availed of will be limited to 50 per cent of the annual export earnings realized during the past financial year. The foreign exchange for repayment of ECB should not be accessed from Indian markets and the liability arising out of ECB should be extinguished only out of the foreign exchange earnings of the borrowing company. The overall ceiling for such ECBs shall be USD10 (ten) billion and the maximum ECB that can be availed by an individual company or group, as a whole, under this scheme will be restricted to USD 3 billion. Within the overall ceilings given above, Indian companies in the aforesaid three sectors which have established Joint Venture (JV)/ Wholly Owned Subsidiary (WOS) / have acquired assets overseas in compliance with extant regulations under FEMA can raise ECB for repayment of all term loans having average residual maturity of 5 years and above and credit facilities availed of from domestic banks for overseas investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective borrower (builder/developer) will be advised by the NHB to approach RBI for availing ECB through his Authorised Dealer in the prescribed format. The ECB should be swapped into Rupees for the entire maturity on fully hedged basis. Housing Finance Companies (HFCs) registered with the National Housing Bank (NHB) and operating in accordance with the regulatory directions and guidelines issued by NHB are eligible to avail of ECB for financing low cost affordable housing units. The minimum Net Owned Funds (NOF) of HFCs for the past three financial years should not be less than INR 300 crore. Borrowing through ECB should be within overall borrowing limit of 16 (sixteen) times of their Net Owned Fund (NOF) and the net non-performing assets (NNPA) should not exceed 2.5 % of the net advances. The maximum loan amount sanctioned to the individual buyer will be capped at INR 25 lakh subject to the condition that the cost of the individual housing unit shall not exceed INR 30 lakh. HFCs while making the applications, shall submit a certificate from NHB that the availment of ECB is for financing prospective owners of individual units for the low cost affordable housing and ensure t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.23.4 Forms: The borrowing can be in form of loans or non-convertible, optionally convertible or partially convertible preference shares. 2.23.5 Currency: The borrowing should be denominated in any freely convertible currency or in Indian Rupees (INR) or a combination thereof. In case of borrowing in INR, the non-resident lender, should mobilise INR through swaps/outright sale undertaken through an AD Category-I bank in India. 2.23.6 Amount: The borrowing per Startup will be limited to USD 3 million or equivalent per financial year either in INR or any convertible foreign currency or a combination of both. 2.23.7 All-in-cost: Shall be mutually agreed between the borrower and the lender. 2.23.8 End uses: For any expenditure in connection with the business of the borrower. 2.23.9 Conversion into equity: Conversion of ECB into equity is freely permitted subject to Regulations applicable for foreign investment in Startups. 2.23.10 Security: The choice of security to be provided to the lender is left to the borrowing entity. Security can be in the nature of movable, immovable, intangible assets (including patents, intellectual property rights), financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions under the ECB framework will be applicable to such ECBs. 3. Framework for issuance of Rupee denominated bonds overseas 3.1 Form of borrowing: The framework for issuance of Rupee denominated bonds overseas enables eligible resident entities to issue only plain vanilla Rupee denominated bonds issued overseas in a Financial Action Task Force (FATF) compliant financial centres. The bonds can be either placed privately or listed on exchanges as per host country regulations. 3.2 Available route 43 of borrowing: 44 Any proposal of borrowing by eligible Indian entities by issuance of these bonds have to be forwarded through the AD bank to Foreign Exchange Department, Central Office, Mumbai of the Reserve Bank for examination under the approval route. If the proposal is approved by the Reserve Bank, the borrowing entity may then approach the Department of Statistics and Information Management for obtaining loan registration number. 45 46 47 3.3 Parameters of borrowing by issuance of Rupee denominated bonds: Various parameters for raising loan under the Framework for issuance of Rupee denominated bonds overseas are given below: 3.3.1 Minimum Maturity: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dress the deficiencies. 52 Further, Multilateral and Regional Financial Institutions where India is a member country will also be considered as recognised investors. 53 However, related party within the meaning as given in Ind-AS 24 cannot subscribe or invest in or purchase such bonds.Indian banks, 54 subject to applicable prudential norms, can 55 participate as arrangers/underwriters/market makers/traders in RDBs issued overseas. 56 57 However, underwriting by overseas branches/subsidiaries of Indian banks for issuances by Indian banks will not be allowed. 3.3.4 All-in-Cost: 58 The all-in-cost ceiling for such bonds will be 59 450 basis points over the prevailing yield of the Government of India securities of corresponding maturity. 60 3.3.5 End-use Prescriptions: The proceeds of the borrowing can be used for all purposes except for the following: Real estate activities other than development of integrated township / affordable housing projects; Investing in capital market and using the proceeds for equity investment domestically; Activities prohibited as per the foreign direct investment guidelines; On-lending to other entities for any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or their ADs using or establishing structures which contravene the above shall render themselves liable for penal action as prescribed under FEMA. PART III 5. Raising of loans as Trade Credit 5.1 Trade Credit: Trade Credits refer to the credits extended by the overseas supplier, bank and financial institution for maturity up to five years for imports into India. Depending on the source of finance, such trade credits include suppliers credit or 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 extant Foreign Trade Policy of the Director General of Foreign Trade (DGFT). 5.2 Routes and Amount of Trade Credit: The available routes of raising Trade Credit are mentioned below: 5.2.1 Automatic Route: ADs are permitted to approve trade credit for import of non-capital and capital goods up to USD 20 million or equivalent per import transaction. 5.2.2 Approval Route: The proposals involving trade credit for import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Each trade credit may be given a unique identification number by the AD bank. Format of Form TC is available at Annex IV of Part V of Master Directions Reporting under Foreign Exchange Management Act. 5.6.2. Quarterly reporting: AD Category I banks are also required to furnish data on issuance of bank guarantees/ 70 by all its branches, in a consolidated statement, at quarterly intervals to the Foreign Exchange Department, External Commercial Borrowings Division, Reserve Bank of India, Central Office, 11th floor, Fort, Mumbai 400 001 (and in MS-Excel file through email) so as to reach the Department not later than 10th of the following month. Format of this statement is available at Annex V of Part V of Master Directions Reporting under Foreign Exchange Management Act. PART IV 6. Borrowing and Lending in foreign currency by an Authorised Dealer 6.1 Borrowing in foreign currency by an Authorised Dealer: An authorised dealer in India may borrow in foreign currency in the circumstances and subject to the conditions mentioned below: The borrowing may be from the Head Office or branch or correspondent outside India of the authorised dealer or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o compliance with prudential norms, interest rate directives and guidelines, if any, issued by RBI from time to time. PART V 7. Borrowing and Lending in Foreign currency by persons other than authorised dealer 7.1 Borrowing in foreign currency by persons other than an authorised dealer: The circumstances and the conditions regarding borrowing in foreign currency by persons other than an authorised dealer are mentioned below: i. For execution of projects outside India and for exports on deferred payment terms: 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, for execution outside India of a turnkey project or civil construction contract or in connection with exports on deferred payment terms, provided the terms and conditions stipulated by the authority which has granted the approval to the project or contract or export is in accordance with the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000. ii. For imports: An importer in India may, for import of goods into India, avail of foreign currency credit for a period not exceeding six months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the form of derivative contract by residents that are subsidiaries of multinational companies, is guaranteed by a non-resident (non resident group entity in case of derivative contracts), there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The arrangements shall be with the following terms: The non-resident guarantor may discharge the liability by i) payment out of rupee balances held in India or ii) by remitting the funds to India or iii) by debit to his FCNR(B)/NRE account maintained with an AD bank in India. In such cases, the non-resident guarantor may enforce his claim against the resident borrower to recover the amount and on recovery he may seek repatriation of the amount if the liability is discharged either by inward remittance or by debit to FCNR(B)/NRE account. However, in case the liability is discharged by payment out of Rupee balances, the amount recovered can be credited to the NRO account of the non-resident guarantor. General Permission is available to a resident, being a principal debtor to make payment to a person resident outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chever is higher; Non-Banking Financial Companies - Infrastructure Finance Companies proposing to avail of the credit enhancement facility should comply with the eligibility criteria and prudential norms laid down in the circular DNBS.PD.CC No.168/03.02.089/2009-10 dated February 12, 2010 and in case the novated loan is designated in foreign currency, the IFC should hedge the entire foreign currency exposure; and The reporting arrangements as applicable to the ECBs would be applicable to the novated loans. APPENDIX List of notifications/ circulars which have been consolidated in this Master Direction Sl. No. Notification Date 1 FEMA.3/2000-RB May 03, 2000 2 FEMA.60/2002-RB April 29, 2002 3 FEMA.75/2002-RB November 01, 2002 4 FEMA.80/2003-RB January 08, 2003 5 FEMA.82/2003-RB January 10, 2003 6 FEMA.112/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular Date 1 A.D. (MA) 11 May 16, 2000 2 A.P.(DIR Series) Circular No.41 April 29, 2002 3 A.P.(DIR Series) Circular No.29 October 18, 2003 4 A.P.(DIR Series) Circular No.60 January 31, 2004 5 A.P.(DIR Series) Circular No.75 February 23, 2004 6 A.P.(DIR Series) Circular No.82 April 1, 2004 7 A.P.(DIR Series) Circular No.87 April 17, 2004 8 A.P.(DIR Series) Circular No.15 October 1, 2004 9 A.P.(DIR Series) Circular No.24 November 1, 2004 10 A.P.(DIR Series) Circular No.40 April 25, 2005 11 A.P.(DIR Series) Circular No.5 August 1, 2005 12 A.P.(DIR Serie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 9, 2009 36 A.P.(DIR Series) Circular No.28 January 25, 2010 37 A.P.(DIR Series) Circular No.33 February 9, 2010 38 A.P.(DIR Series) Circular No.38 March 2, 2010 39 A.P.(DIR Series) Circular No.39 March 2, 2010 40 A.P.(DIR Series) Circular No.40 March 2, 2010 41 A.P.(DIR Series) Circular No.44 March 29, 2010 42 A.P.(DIR Series) Circular No.51 May 12, 2010 43 A.P.(DIR Series) Circular No.04 July 22, 2010 44 A.P.(DIR Series) Circular No.08 August 12, 2010 45 A.P.(DIR Series) Circular No.01 July 04, 2011 46 A.P.(DIR Series) Circular No.11 September 07, 2011 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70 A.P.(DIR Series) Circular No. 1 July 5, 2012 71 A.P.(DIR Series) Circular No. 20 August 29, 2012 72 A.P.(DIR Series) Circular No.26 September 11, 2012 73 A.P.(DIR Series) Circular No.27 September 11, 2012 74 A.P.(DIR Series) Circular No.28 September 11, 2012 75 A.P.(DIR Series) Circular No.39 October 9, 2012 76 A.P.(DIR Series) Circular No.40 October 9, 2012 77 A.P.(DIR Series) Circular No.48 November 6, 2012 78 A.P.(DIR Series) Circular No.54 November 26, 2012 79 A.P.(DIR Series) Circular No.58 December 14, 2012 80 A.P.(DIR Series) Circular No.59 December 14, 2012 81 A.P.(DIR Serie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular No. 57 September 30, 2013 105 A.P.(DIR Series) Circular No.58 September 30, 2013 106 A.P.(DIR Series) Circular No.59 September 30, 2013 107 A.P.(DIR Series) Circular No.78 December 03, 2013 108 A.P.(DIR Series) Circular No.85 January 06, 2014 109 A.P.(DIR Series) Circular No.94 January 16, 2014 110 A.P.(DIR Series) Circular No.105 February 17, 2014 111 A.P.(DIR Series) Circular No.113 March 26, 2014 112 A.P.(DIR Series) Circular No.121 April 10, 2014 113 A.P.(DIR Series) Circular No.122 April 10, 2014 114 A.P.(DIR Series) Circular No.128 May 09, 2014 115 A.P.(DIR Series) Circular No.129 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 31 February 16, 2017 139 A.P.(DIR Series) Circular No. 47 June 7, 2017 140 A. P. (DIR Series) Circular No. 6 September 22, 2017 141 A.P.(DIR Series) Circular No. 15 January 4, 2018 142 A.P.(DIR Series) Circular No. 20 March 13, 2018 142 A.P.(DIR Series) Circular No. 25 April 27, 2018 143 A.P.(DIR Series) Circular No. 29 June 07, 2018 144 A.P.(DIR Series) Circular No. 9 September 19, 2018 145 A.P.(DIR Series) Circular No. 10 October 03, 2018 1 Inserted vide AP (DIR Series) Circular No.15 dated November 07, 2016 2 Inserted vide AP (DIR Series) Circular No.13 dated October 27, 2016 3 Inserted vide AP (DIR Series) Circular No.14 dated November 03, 2016 4 Inserted vide A.P.(DIR Series) Circular No 56 dated March 30, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Track I Track II Track III i. ECB proceeds can be utilised for capital expenditure in the form of: Import of capital goods including payment towards import of services, technical know-how and license fees, provided the same are part of these capital goods; Local sourcing of capital goods; New project; Modernisation /expansion of existing units; Overseas direct investment in Joint ventures (JV)/ Wholly owned subsidiaries (WOS); Acquisition of shares of public sector undertakings at any stage of disinvestment under the disinvestment programme of the Government of India; Refinancing of existing trade credit raised for import of capital goods; Payment of capital goods already shipped / imported but unpaid; Refinancing of existing ECB provided the residual maturity is not reduced. ii. SIDBI can raise ECB only for the purpose of on-lending to the borrowers in the Micro, Small and Medium Enterprises (MSME sector), where MSME sector is as defined under the MSME Development Act, 2006, as amended from time to time. iii. Units of SEZs can raise ECB only for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27, 2018 Deleted portion read as For ECB raised under the automatic route, 24 Modified vide A.P. (DIR Series) Circular No.25 dated April 27, 2018. Prior to modification it read as four 25 Deleted vide A.P. (DIR Series) Circular No.25 dated April 27, 2018 Deleted portion read as For ECB raised under the approval route, this ratio should not be more than 7:1. 26 Inserted vide A.P.(DIR Series) Circular No. 56 dated March 30, 2016 27 Inserted vide A.P. (DIR Series) Circular No.11 dated November 6, 2018 28 Inserted vide A.P.(DIR Series) Circular No. 15 dated November 7, 2016 29 Inserted vide A.P. (DIR Series) Circular No. 10 dated October 20, 2016 30 Modified vide AP (DIR Series) Circular No.10 dated October 20, 2016 prior to modification it read as The foreign equity holding after such conversion of debt into equity is within the applicable sectoral ca p 31 Point iv.v and vi Inserted vide A. P. (DIR Series) Circular No. 10 dated October 20, 2016 32 Modified vide AP (DIR Series) Circular No.80 dated June 30,2016 prior to modification it read as by an Empowered Committee set up by RBI. The Empowered Committee will have external as well as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.P.(DIR Series) Circular No 60 dated April 13, 2016. Prior to the replacement it read as: Any investor from a FATF compliant jurisdiction can invest in the bonds issued under the Framework. 52 Inserted vide A. P. (DIR Series) Circular No. 31 dated February 16, 2017. 53 Inserted vide A. P. (DIR Series) Circular No. 47 dated June 07, 2017 54 Deleted the words shall not have access to these bonds but vide A.P.(DIR Series) Circular No 14 dated November 3, 2016 55 Inserted vide A. P. (DIR Series) Circular No. 9 dated September 19, 2018 56 Deleted the words In case of an Indian bank underwriting an issue, its holding cannot be more than 5 per cent of the issue size after 6 months of issue vide A. P. (DIR Series) Circular No. 9 dated September 19, 2018 57 Inserted vide A.P.(DIR Series) Circular No 14 dated November 3, 2016 58 Inserted vide A. P. (DIR Series) Circular No. 47 dated June 07, 2017 59 Modified vide A.P. (DIR Series) Circular No.25 dated April 27, 2018. Prior to modification it read as 300 . 60 Deleted vide A. P. (DIR Series) Circular No. 47 dated June 07, 2017 Deleted portion read as The all-in-cost of borrowing by issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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