ECB important points

Master Circular valid up to 1st July 2008
External commercial Borrowings ECB: refer to commercial loans [in the form of bank loans, buyer’s credit, and supplier’s credit, Securitised instruments (e.g. floating rate notes and fixed rate bonds].
FCCB mean a bond issued by an Indian company expressed in foreign currence and the principal and interest in respect of which is payable in foreign currency.
ECB can be accessed under two routes
Automatic Route: ECB for investment in real sector- industrial sector, especially infrastructure sector in India are under Automatic Route i.e. do not require RBI/Government approval.
Approval Route
Automatic Route:
Eligible Borrowers:
i. Corporate registered under the Companies Act except financial intermediaries (Banks, FIs, Housing finance, NBFC) are eligible to raise ECB.
ii. Units in Special Economic Zones are allowed to raise ECB for their own requirement. However, they cannot transfer or on-lend ECB funds to sister concern or any unit in the Domestic Tariff Area.
Recognised Lenders:
i. Borrowers can raise ECB from internationally recognised sources such as international bank, international capital market, multilateral financial institution such as IFC, ADB etc, suppliers of equipment, foreign equity holders.
Amount and Maturity:
i. Maximum amount per corporate is USD 500 Million or equivalent during financial year.
ii. Infrastructure: ECB up to USD 100 Million for Rupee expenditure for permissible end-uses under the Approval Route (Circular no 43) May 29th 2008.
iii. Other borrowers : USD 50 Million
All in cost ceilings:
i. All in cost includes:
1. Rate of interest
2. Other fees and expenses in foreign currence
ii. Not included in all in cost
1. Commitment fee
2. prepayment fee
3. fees payable in India Rupee
4. Payment of withholding tax in Indian Rupees
iii. All in cost ceilings over 6 months LIBOR
1. 3 years to 5 years è200 bps
2. More than 5 years è350 bps



End use:
i. ECB can be raised only for investment [Such as import of capital goods (as classified by DGFT in foreign trade policy), New projects, modernization/expansion of existing production units] in real sector- industrial sector including SME and Infrastructure.
ii. Infrastructure includes
1. Power
2. Telecommunication
3. Railways
4. Road including bridges
5. Sea port and airport
6. Industrial parks
7. Urban infrastructure
End use not permitted
i. On-lending or investment in capital market
ii. Acquiring a company in India
iii. Real estate
iv. Working capital
v. General corporate purpose
vi. Repayment of existing Rupee loan
Procedure: Applicants are required to submit an application form ECB through designated AD bank to the chief General Manager, Foreign exchange Department, RBI.