The master circular released by RBI on External Commercial Borrowings can be read here.
In simple terms, External Commercial Borrowings (ECB) refer to commercial loans [in the form of bank loans, buyers’ credit, suppliers’ credit, securitized instruments (e.g. floating rate notes and fixed rate bonds)] availed from non-resident lenders with minimum average maturity of 3 years.
There are two types of ECB’s 01) Automatic Route and 02) Approval Route
One major change in the ECB policy was announced on February 09, 2010 by which AD (Authorized Dealers – I) Banks were permitted to approve changes/modifications in he drawdown / repayment schedule of the ECB’s availed by corporate’s. This facility was available for ECBs availed under both the approval and automatic routes. Of course, there are terms and conditions are there.
However, any elongation / rollover in the repayment on expiry of the original maturity of the ECB required the prior approval of the Reserve Bank.
Through Circular No: RBI/2013-14/584 A.P. (DIR Series) Circular No. 128 dt.May 9, 2014, Reserve Bank of India delegated the power to the designated AD Category – I banks to allow reschedulement of the ECB’s wherein changes were made in draw-down schedule and / or repayment schedule.
- The delegation power is subject to the following conditions:
- Changes, if any, in all-in-cost (AIC) is only on account of the change in average maturity period (AMP) due to re-schedulement of ECB and post re-schedulement, the AIC and the AMP are in conformity with applicable guidelines. There should not be any increase in the rate of interest and no additional cost (in foreign currency / Indian Rupees) should be involved.
- The re-schedulement is allowed only once, before the maturity of the ECB.
- If the lender is an overseas branch of a domestic bank, the prudential norms applicable on account of re-schedulement should be complied with.
- The changes on account of re-schedulement should be reported to DSIM through revised Form 83.
- The ECB should be in compliance with all applicable guidelines related to eligible borrower, recognised lender, AIC, AMP, end-uses, etc.
- The borrower should not be in the default / caution list of RBI and should not be under the investigation of Directorate of Enforcement.
- The facility will be available for ECBs raised both under the automatic and approval routes. Provisions of this Circular do not apply to FCCBs.
The modification to the ECB policy will come into force with immediate effect. All other aspects of the ECB policy shall remain unchanged.