Reserve Bank Of India
A.P. (DIR Series) Circular No. 48
November 6, 2012
To
All Category - I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) Policy – ECB by Small Industries
Development Bank of India (SIDBI)
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to
the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange)
Regulations, 2000, notified vide Notification No. FEMA 3/2000-RB dated May 3,
2000, amended from time to time and
A.P. (DIR Series) Circular No. 5 dated
August 1, 2005 relating to the External Commercial Borrowings (ECB).
- On a review of the extant ECB policy, it has been decided to include SIDBI as
an eligible borrower for availing of ECB for on-lending to MSME sector, as
defined under the Micro, Small and Medium Enterprises Development (MSMED) Act,
2006, subject to the following terms and conditions:-
- such on-lending by SIDBI shall be to the borrowers’ directly either in INR
or in foreign currency (FCY);
- the foreign currency risk shall be hedged by SIDBI in full in case of on-lending
to MSME sector in INR; and
- on-lending in foreign currency shall be subject to Regulation 5(5) of FEMA
Notification No. 3/2000-RB dated May 03, 2000, as amended from time to time and
shall only be to those beneficiaries which have natural hedge by way of foreign
exchange earnings;
- availment of ECBs, including the outstanding ECBs, up to 50 per cent of
their owned funds, for on-lending to MSME sector, will be under the automatic
route and beyond 50 per cent of owned funds, will be under the approval route,
subject to a ceiling of USD 500 million per financial year; and
- the proceeds of ECB availed by SIDBI, shall be used for on-lending to MSME
sector only for the permissible end-uses as provided under the extant ECB
policy.
- All other conditions of ECB, such as recognized lender, all- in-cost, average
maturity, prepayment, refinancing of existing ECB and reporting arrangements
shall remain unchanged.
- The amended ECB policy shall come into force with immediate effect and is
subject to review based on the experience gained in this regard.
- 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
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager
RBI/2012-13/284