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External Commercial Borrowings � Crystallisation of Liability
A. P. (DIR Series) Circular No. 41 dated 29th April 2002
Corporates in India, at times, raise External Commercial Borrowings (ECBs) against a
guarantee/letter of comfort from a bank in India. In certain cases the loan liability of the Corporates gets
devolved on banks.
2.
With a view to providing greater freedom and flexibility to banks in their fund management, it has been
decided to grant permission to banks to crystallise their foreign exchange liability in rupees, in select
cases, where circumstances so warrant, keeping in view the status of the account of the borrower who had
raised External Commercial Borrowing.
3.
Therefore, Authorised Dealers desirous of crystallising their foreign exchange liability, arising out
of guarantees provided for ECBs raised by Corporates in India, into Rupees may make an application to the
Chief General Manager, Exchange Control Department, External Commercial Borrowings Division, Reserve bank of
India, Central Office, Mumbai, giving full details viz., name of the borrower, amount raised, maturity,
circumstances leading to invocation of guarantee/ letter of comfort, date of default, its impact on the
liabilities of the overseas branch of the Authorised Dealer concerned and other relevant factors.
4. Authorised Dealers may bring the
contents of this Circular to the notice of their constituents concerned.
5.
The directions contained in this circular have been issued under Section 10 (4) and Section 11 (1) of
the Foreign Exchange Management Act 1999 (42 of 1999).
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