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RBI/2014-15/608
A. P. (DIR Series) Circular No. 103
May 21, 2015
To
All Category-I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) denominated in
Indian Rupees (INR) – Mobilisation of INR
Attention of Authorized Dealers Category – I (AD Cat – I) banks is invited to
the Foreign Exchange Management (Foreign Exchange Derivative Contracts)
Regulations, 2000 dated May 3, 2000 [Notification
No. FEMA 25/RB-2000 dated May 3, 2000], as amended from time to
time,
A.P. (DIR Series) Circular No.63 dated December 29, 2011 and
A.P. (DIR Series) Circular No. 25 dated September 3, 2014.
2. In terms of
A.P. (DIR Series) Circular No. 25 dated September 3, 2014,
recognised non-resident ECB lenders may extend loans in Indian Rupees subject
to, inter alia, the lender mobilising Indian Rupees through a swap undertaken
with an AD Cat-I bank in India. To facilitate ECB lending denominated in INR by
overseas lenders, it has now been decided that such lenders may enter into swap
transactions with their overseas bank which shall, in turn, enter into a
back-to-back swap transaction with any AD Cat-I bank in India as per the
procedure given below:
(i) The recognised non-resident lender approaches his overseas
bank with appropriate documentation as evidence of an underlying ECB denominated
in INR with a request for a swap rate for mobilising INR for onward lending to
the Indian borrower.
(ii) The overseas bank, in turn, approaches an AD Cat-I bank for a swap rate
along with documentation furnished by the customer that will enable the AD bank
in India to satisfy itself that there is an underlying ECB in INR (scanned
copies would be acceptable).
(iii) A KYC certification on the end client shall also be taken by the AD bank
in India as a one-time document from the overseas bank.
(iv) Based on the documents received from the overseas bank, the AD bank in
India should satisfy itself about the existence of the underlying ECB in INR and
offer an indicative swap rate to the overseas bank which, in turn, will offer
the same to the non-resident lender on a back-to-back basis.
(v) The continuation of the swap shall be subject to the existence of the
underlying ECB at all times.
(vi) On the due date, settlement may be done through the Vostro account of the
overseas bank maintained with its counterparty bank in India.
(vii) All other Operational Guidelines, Terms and Conditions as contained in the
annex to
A.P. (DIR Series) Circular No.63 dated December 29, 2011 governing
hedging of ECBs denominated in INR shall apply, mutatis mutandis.
(viii) The concerned AD Cat-I bank shall keep on record all related
documentation for verification by Reserve Bank.
3. AD Category - I banks may bring the contents of this circular to the
notice of their constituents and customers.
4. 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 are
without prejudice to permissions/approvals, if any, required under any other
law.
Yours faithfully,
(R Subramanian)
Chief General Manager
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