A.P. (DIR Series) Circular No.19
December 9, 2009
All Category - I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) Policy
Attention of Authorized Dealer Category - I (AD Category - I) banks is invited
to the A.P. (DIR Series) Circular No. 46 dated January 2, 2009,
Series) Circular No. 64 dated April 28, 2009 and A.P. (DIR Series) Circular No.
71 dated June 30, 2009 relating to External Commercial Borrowings (ECB).
- On a review of the prevailing macroeconomic conditions and developments in
international financial markets, it has been decided to modify some aspects of
the ECB policy as indicated below:
- All-in-cost ceilings
As per the extant policy, the all-in-cost ceilings have been dispensed with,
under the approval route, until December 31, 2009. In view of the improvement in
the credit market conditions and narrowing credit spreads in the international
markets, it has been decided to withdraw the existing relaxation in the
all-in-cost ceilings under the approval route with effect from January 1, 2010.
Accordingly, the all-in-cost ceilings under the approval route for the ECBs,
where Loan Agreements have been signed on or after January 1, 2010 will be as
|Average Maturity Period
||All -in-cost Ceilings over six month Libor*
|Three years and up to five years
||300 basis points
|More than five years
||500 basis points
*for the respective currency of borrowing or applicable benchmark.
Eligible borrowers proposing to avail of ECB after December 31, 2009, where the
Loan Agreement has been signed on or before December 31, 2009 and where the
all-in-cost exceed the above ceilings, should furnish a copy of the Loan
Agreement. Such proposals would continue to be considered under the approval
- Integrated township
As per the extant policy, corporates, engaged in the development of integrated
township, as defined in Press Note 3 (2002 Series) dated January 04, 2002,
issued by the Department of Industrial Policy and Promotion (DIPP), Ministry of
Commerce & Industry, Government of India are permitted to avail of ECB, under
the approval route, until December 31, 2009. On a review of the prevailing
conditions, it has been decided to extend the current policy until December 31,
2010, under the approval route. All other terms and conditions, stipulated in
the A.P. (DIR Series) Circulars referred to above, remain unchanged.
- Buyback of the Foreign Currency Convertible Bonds (FCCBs)
In terms of A.P. (DIR Series) Circular No. 39 dated December 8, 2008, read with
A.P. (DIR Series) Circular No. 58 dated March 13, 2009 and A.P. (DIR Series)
Circular No. 65 dated April 28, 2009, Indian companies have been allowed to
buyback their Foreign Currency Convertible Bonds (FCCBs) both under the
automatic route and approval route until December 31, 2009. Keeping in view the
prevailing macroeconomic conditions and global developments, especially the
improvements in the stock prices, it has been decided to discontinue the
facility with effect from January 1, 2010.
- ECB for the NBFC Sector
As per the current ECB norms, Non-Banking Finance Companies (NBFCs), which are
exclusively involved in the financing of the infrastructure sector, are
permitted to avail of ECBs from multilateral / regional financial institutions
and Government owned development financial institutions for on-lending to the
borrowers in the infrastructure sector under the approval route. In view of the
thrust given to development of infrastructure sector, it has been decided with
immediate effect to allow NBFCs exclusively involved in financing the
infrastructure projects to avail of ECB from the recognized lender category
including international banks under the approval route, subject to complying
with the prudential standards prescribed by the Reserve Bank and the borrowing
entities fully hedging their currency risk. The AD Category-I bank should
certify the compliance with the prudential norms by the borrowing NBFCs.
- ECB for Spectrum in the Telecommunication Sector
As per the extant policy, as indicated in A.P. (DIR Series) Circular No. 26
dated October 22, 2008, payment for obtaining license/permit for 3G Spectrum is
considered an eligible end - use for the purpose of ECB under the automatic
route. It has now been decided to permit eligible borrowers in the
telecommunication sector to avail of ECB for the purpose of payment for Spectrum
allocation. This modification will come into effect with immediate effect.
- All other aspects of ECB policy such as USD 500 million limit per company per
financial year under the automatic route, eligible borrower, recognised lender,
end-use, average maturity period, prepayment, refinancing of existing ECB,
reporting arrangements and terms and conditions stipulated in the A.P. (DIR
Series) Circulars shall remain unchanged.
- AD Category-I banks may bring the contents of this circular to the notice of
their constituents and customers concerned.
- The directions contained in this circular have been issued under sections
10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
is without prejudice to permissions/approvals, if any, required under any other
Chief General Manager-in-Charge