(iii) Multilateral financial institutions
(iv) Export Credit Agencies,
(v) Suppliers of Equipment,
(vi) Foreign Collaborators and
(vii) Foreign Equity Holders (other than
erstwhile Overseas Corporate Bodies).
Restrictions:
1. Utilization for on-lending or investment in
capital market or acquiring a company (or a part
thereof) in India by a corporate, investment in
real estate sector, for working capital and
repayment of existing Rupee loans.
2. Issuance of guarantee, standby letter of credit,
letter of undertaking or letter of comfort by
banks, FIs and NBFCs from India relating to
ECB.
3. The borrower has the option to offer security
against the ECB. Creation of charge over
immoveable assets and financial securities, such
as shares, in favour of the overseas lender is
subject to FEMA regulations and ECB guidelines.
APPROVAL ROUTE
Features:
Proposals falling under the category include:1. On lending by the EXIM Bank for specific
purposes (case to case basis).
2. Banks and financial institutions which had
participated in the textile or steel sector
restructuring package as approved by the
Government.
3. ECB with minimum average maturity of 5 years
by NBFC to finance import of infrastructure
equipment for leasing to infrastructure projects.
4. Infrastructure Finance Companies (IFCs) i.e.
NBFCs, categorized as IFCs, by RBI (beyond 50%
of their owned funds) for on-lending to the
infrastructure sector as defined under the ECB
policy and subject to compliance of certain
stipulations.
5. Foreign Currency Convertible Bonds (FCCBs) by
Housing Finance Companies.
6. Special Purpose Vehicles (SPV) or any other
entity notified by the RBI, set up to finance
infrastructure companies / projects exclusively.
7. Financially solvent Multi-State Co-operative
Societies engaged in manufacturing.
8. SEZ developers for providing infrastructure
facilities within SEZ.
9. Eligible Corporate under automatic route other
than in the services sector viz. hotels, hospitals
and software sector can avail of ECB beyond
USD 750 million per financial year.
10. Corporate in the service sector for availing ECB
beyond USD 200 Mn. per financial year.
11. Cases falling outside the purview of the
automatic route limits and maturity indicated,
etc.
Restrictions:
Most of the restrictions for accessing funds through
this route are the same as those of the Automatic
Route. Some of these have undergone certain
changes, especially those related to this route, since
the new RBI guidelines came into effect in 2013. The
same has been discussed in the next section.
CHANGES
As it can be observed from the above details, the
Indian companies are under heavy restrictions when
borrowing funds from foreign lenders. Though, in the
new circular issued by the Reserve Bank of India in
2013 some of the restrictions have been relaxed. Some
of them are analysed in this section:
1. End use of ECB: previously, ECB could only be
availed in for financial investments. But as per the
new RBI circular, this restriction has been
drastically relaxed.
The permissible use of ECB now also includes using
it for “general corporate purposes”.
The new RBI guidelines allow the use of such ECB
towards repayment of buyer’s debt, supplier’s debt
and 25% of ECB to be utilized towards repayment of
existing rupee debt, only if ECB is accessed through
the approval route.
This, still, is subject to certain restrictions as levied
by the RBI: