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RBI/2019-20/20
A.P. (DIR Series) Circular No. 04
July 30, 2019
To
All Category-I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) Policy – Rationalisation of End-use Provisions
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to
paragraphs 2.1.(v) and 2.1.(viii) of Master Direction No.5 dated March 26, 2019
on the above subject in terms of which, inter alia, ECB proceeds cannot be
utilised for working capital purposes, general corporate purposes and repayment
of Rupee loans except when the ECB is availed from foreign equity holder for a
minimum average maturity period of 5 years. Further, on-lending for these
activities out of ECB proceeds is also prohibited.
2. Based on the
feedback from stakeholders and with a view to further liberalise the ECB
framework, it has been decided, in consultation with the Government of India, to
relax the end-use restrictions. Accordingly, eligible borrowers will now be
permitted to raise ECBs for the following purposes from recognised lenders,
except foreign branches/ overseas subsidiaries of Indian banks, subject to
paragraph 2.2 of the direction ibid:
ECBs with a minimum average maturity
period of 10 years for working capital purposes and general corporate purposes.
Borrowing by NBFCs for the above maturity for on lending for the above purposes
is also permitted.
ECBs with a minimum average maturity period of 7 years
can be availed by eligible borrowers for repayment of Rupee loans availed
domestically for capital expenditure as also by NBFCs for on-lending for the
same purpose. For repayment of Rupee loans availed domestically for purposes
other than capital expenditure and for on-lending by NBFCs for the same, the
minimum average maturity period of the ECB is required to be 10 years.
It
has been decided to permit eligible corporate borrowers to avail ECB for
repayment of Rupee loans availed domestically for capital expenditure in
manufacturing and infrastructure sector if classified as SMA-2 or NPA, under any
one time settlement with lenders. Lender banks are also permitted to sell,
through assignment, such loans to eligible ECB lenders, except foreign branches/
overseas subsidiaries of Indian banks, provided, the resultant external
commercial borrowing complies with all-in-cost, minimum average maturity period
and other relevant norms of the ECB framework.
3. The prescribed minimum
average maturity provision, as above, for the aforesaid end-uses will have to be
strictly complied with under all circumstances.
4. All other provisions
of the ECB policy remain unchanged. AD Category - I banks should bring the
contents of this circular to the notice of their constituents and customers.
5. The Master Direction No. 5 dated March 26, 2019 is being updated to
reflect the above changes.
6. The directions contained in this circular
have been issued under section 10(4) and 11(2) of the Foreign Exchange
Management Act, 1999 (42 of 1999) and are without prejudice to permissions /
approvals, if any, required under any other law.
Yours faithfully
Ajay Kumar Misra
Chief General Manager-in-Charge
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