TaxTMI 
TaxTMI 
Master Circular on External Commercial Borrowings and Trade Credits
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....OWINGS (ECB)..... I.(A) AUTOMATIC ROUTE i) Eligible Borrowers. Amount and Maturity. All-in-cost ceilings End-use vi) End Uses not permitted vii) Guarantees.. viii) Security..... ix) Parking of ECB proceeds.. x) Prepayment ..... xi) xii) Debt Servicing xiii) I.(B) Refinancing of an existing ECB Procedure.. APPROVAL ROUTE i) Eligible Borrowers.. ii) Recognised Lenders iii) Amount and Maturity. iv) All-in-cost ceilings. End-use vi) End-uses not permitted. vii) Guarantee... viii) Security....... ix) Parking of ECB proceeds.... x) Prepayment ...... xi) Refinancing of an existing ECB xii) Debt Servicing xiii) Procedure xiv) Foreign Currency Exchangeable Bonds. 3 4 33445 4 5 6 7 7 8 8 9 11 11 12 12 12 12 12 14 14 15 15 16 17 17 18 18 18 19 19 19 .21 xv) Empowered Committee II. REPORTING ARANGEMENTS AND DISSEMINATION OF INFORMATION 22 i) Reporting Arrangements. ii) Dissemination of Information... III. STRUCTURED OBLIGATIONS 22 22 22 IV. COMPLIANCE WITH ECB GUIDELINES .25 V. CONVERSION OF ECB INTO EQUITY. .25 VI. CRYSTALLISATION OF ECB ..... 26 VII. VIII. ECB UNDER THE ERSTWHILE USD 5 MILL....
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.... Accordingly, all the norms applicable for ECBs, viz. eligible borrowers, recognised lenders, amount and maturity, end use stipulations, etc. shall apply. Since these instruments would be denominated in Rupees, the rupee interest rate will be based on the swap equivalent of LIBOR plus the spread as permissible for ECBS of corresponding maturity. (d) Foreign Currency Exchangeable Bond (FCEB) means a bond expressed in foreign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity 3 4 of 50 share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. The FCEB must comply with the “Issue of Foreign Currency Exchangeable Bonds (FCEB) Scheme, 2008â€, notified by the Government of India, Ministry of Finance, Department of Economic Affairs vide Notification G.S.R.89(E) dated February 15, 2008. The guidelines, rules, etc governing ECBs are also applicable to FCEBs. (e) ECB ca....
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....ate Bodies (OCBs)). A "foreign equity holder" to be eligible as “recognized lender" under the automatic route would require minimum holding of paid-up equity in the borrower company as set out below: (i) (ii) For ECB up to USD 5 million - minimum paid-up equity of 25 per cent held directly by the lender, For ECB more than USD 5 million - minimum paid-up equity of 25 per cent held directly by the lender and debt-equity ratio not exceeding 4:1 (i.e. the proposed ECB not exceeding four times the direct foreign equity holding) Overseas organizations and individuals complying with following safeguards may provide ECB to Non-Government Organizations (NGOs) engaged in micro finance activities. (i) Overseas Organizations proposing to lend ECB would have to furnish to the AD bank of the borrower a certificate of due diligence from an overseas bank, which in turn is subject to regulation of host-country regulator and adheres to the Financial Action Task Force (FATF) guidelines. The certificate of due diligence should comprise the following (i) that the lender maintains an account with the bank for at least a period 5 6 of 50 iii) a) b) c) d) e) of two years,....
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....n-cost Ceilings over 6 month LIBOR* 300 basis points 500 basis points * for the respective currency of borrowing or applicable benchmark v) End-use a) b) c) ECB can be raised for investment [such as import of capital goods (as classified by DGFT in the Foreign Trade Policy), new projects, modernization/expansion of existing production units] in real sector industrial sector including small and medium enterprises (SME), infrastructure sector and specified service sectors namely hotel, hospital, software in India. Infrastructure sector is defined as (i) power, (ii) telecommunication, (iii) railways, (iv) roads including bridges, (v) sea port and airport, (vi) industrial parks, (vii) urban infrastructure (water supply, sanitation and sewage projects), (viii) mining, exploration and refining and (ix) cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat. Overseas direct investment in Joint Ventures (JV)/ Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/ WOS abroad. Utilization of ECB proceeds is permitte....
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....uarantees in favour of overseas lender / security trustee, to secure the ECB to be raised by the borrower. Before according 'no objection' under FEMA, 1999, AD Category - I banks should ensure and satisfy themselves that (i) the underlying ECB is strictly in compliance with the extant ECB guidelines, (ii) there exists a security clause in the loan agreement requiring the borrower to create charge on immovable assets / financial securities / furnish corporate or personal guarantee, (iii) the loan agreement has been signed by both the lender and the borrower and (iv) the borrower has obtained Loan Registration Number (LRN) from the Reserve Bank. On compliance with the above conditions, AD Category - I banks may convey their 'no objection', under FEMA, 1999 for creation of charge on immovable assets, financial securities and issue of personal or corporate guarantee, subject to the conditions indicated below: a) The 'no objection' for creation of charge on immovable assets may be conveyed under FEMA, 1999 either in favour of the lender or the security trustee, subject to the following conditions: (i) 'No objection' shall be granted only to a resident ECB borrower. (i....
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....ntion or other lapses, if any, under the provisions of FEMA or any other laws or regulations. ix) Parking of ECB proceeds Borrowers are permitted to either keep ECB proceeds abroad or to remit these funds to India, pending utilization for permissible end-uses. ECB proceeds parked overseas can be invested in the following liquid assets (a) deposits or Certificate of Deposit or other products offered by banks rated not less than AA (-) by Standard and Poor/Fitch IBCA or Aa3 by Moody's (b) Treasury bills and other monetary instruments of one year maturity having minimum rating as indicated above, and (c) deposits with overseas branches / subsidiaries of Indian banks abroad. The funds should be invested in such a way that the investments can be liquidated as and when funds are required by the borrower in India. ECB funds may also be repatriated to India for credit to the borrowers' Rupee accounts with AD Category I banks in India, pending utilization for permissible end-uses. x) Prepayment Prepayment of ECB up to USD 500 million may be allowed by AD banks without prior approval of Reserve Bank subject to compliance with the stipulated minimum average maturity period....
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..../ 2009-10 dated February 12, 2010 ii) hedging of the currency risk in full. Designated Authorised Dealer should ensure compliance with the extant norms while certifying the ECB application. Foreign Currency Convertible Bonds (FCCBs) by Housing Finance Companies satisfying the following minimum criteria: (i) the minimum net worth of the financial intermediary during the previous three years shall not be less than Rs. 500 crore, (ii) a listing on the BSE or NSE, (iii) minimum size of FCCB is USD 100 million and (iv) the applicant should submit the purpose/plan of utilization of funds. Special Purpose Vehicles, or any other entity notified by the Reserve Bank, set up to finance infrastructure companies / projects exclusively, will be treated as Financial Institutions and ECB by such entities will be considered under the Approval Route. Multi-State Co-operative Societies engaged in manufacturing activity and satisfying the following criteria i) the Co-operative Society is financially solvent and ii) the Co-operative Society submits its up-to-date audited balance sheet. SEZ developers can avail of ECBs for providing infrastructure facilities within SEZ, as defined in ....
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.... Ceilings over 6 month LIBOR* 300 basis points 500 basis points * for the respective currency of borrowing or applicable benchmark In the case of fixed rate loans, the swap cost plus the margin should be the equivalent of the floating rate plus the applicable margin. v) End-use (a) (b) (c) - ECB can be raised only for investment [such as import of capital goods (as classified by DGFT in the Foreign Trade Policy), implementation of new projects, modernization/expansion of existing production units] in real sector industrial sector including small and medium enterprises (SME) and infrastructure sector - in India. Infrastructure sector is defined as (i) power (ii) telecommunication (iii) railways (iv) roads including bridges (v) sea port and airport (vi) industrial parks (vii) urban infrastructure (water supply, sanitation and sewage projects) (viii) mining, exploration and refining and (ix) cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat. Overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guid....
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....ment of existing Rupee loans. vii) Guarantee Issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort by banks, financial institutions and NBFCs relating to ECB is not normally permitted. Applications for providing guarantee/standby letter of credit or letter of comfort by banks, financial institutions relating to ECB in the case of SME will be considered on merit subject to prudential norms. With a view to facilitating capacity expansion and technological upgradation in Indian textile industry, issue of guarantees, standby letters of credit, letters of undertaking and letters of comfort by banks in respect of ECB by textile companies for modernization or expansion of textile units will be considered under the Approval Route subject to prudential norms. viii) Security The choice of security to be provided to the lender / supplier is left to the borrower. However, creation of charge over immovable assets and financial securities, such as shares, in favour of the overseas lender is subject to Regulation 8 of Notification No. FEMA 21/RB-2000 dated May 3, 2000 and Regulation 3 of Notification No. FEMA 20/RB-2000 dated May 3, 2000 as....
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....ign currency, the principal and interest in respect of which is payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. The FCEB may be denominated in any freely convertible foreign currency. Eligible Issuer: The Issuing Company shall be part of the promoter group of the Offered Company and shall hold the equity share/s being offered at the time of issuance of FCEB. Offered Company: The Offered Company shall be a listed company, which is engaged in a sector eligible to receive Foreign Direct Investment and eligible to issue or avail of Foreign Currency Convertible Bond (FCCB) or External Commercial Borrowings (ECB). Entities not eligible to issue FCEB: An Indian company, which is not eligible to raise funds from the Indian securities market, including a company which has 19 20 of 50 been restrained from accessing the securities market by the SEBI shall not be eligible to issue ....
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....yed overseas by the issuing / promoter group companies in accordance with the policy for the ECB or repatriated to India for credit to the borrowers' Rupee accounts with AD Category I banks in India pending utilization for permissible end-uses. It shall be the responsibility of the issuing company to ensure that the proceeds of FCEB are used by the promoter group company only for the permitted end-uses prescribed under the ECB policy. The issuing company should also submit audit trail of the end-use of the proceeds by the issuing company / promoter group companies to the Reserve Bank duly certified by the designated AD bank. Operational Procedure - Issuance of FCEB shall require prior approval of the Reserve Bank under the Approval Route for raising ECB. The Reporting arrangement for FCEB shall be as per the extant ECB policy. XV) Empowered Committee Reserve Bank has set up an Empowered Committee to consider proposals coming under the Approval Route. 24 21 22 of 50 II. REPORTING ARANGEMENTS AND DISSEMINATION OF INFORMATION i) Reporting Arrangements (a) (b) (c) (d) With a view to simplifying the procedure, submission of copy of loan agreement is dispensed ....
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....The Reserve Bank vide its Notification No. FEMA.29/ RB-2000 dated September 26, 2000 has granted general permission to a resident, being a principal debtor to make payment to a person resident outside India, who has met the liability under a guarantee. Accordingly, in cases where the liability is met by the non-resident out of funds remitted to India or by debit to his FCNR(B)/NRE account, the repayment may be made by credit to the FCNR(B)/NRE/NRO account of the guarantor provided, the amount remitted/credited shall not exceed the rupee equivalent of the amount paid by the non-resident guarantor against the invoked guarantee. The facility of credit enhancement by eligible non-resident entities may be extended to domestic debt raised through issue of capital market instruments, such as debentures and bonds, by Indian companies engaged exclusively in the development of infrastructure and by the Infrastructure Finance Companies (IFCS), which have been classified as such by the Reserve Bank in terms of the guidelines contained in the circular DNBS.PD. CC No. 168 / 03.02.089 / 2009-10 dated February 12, 2010, subject to the following conditions: i) credit enhancement sh....
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....esignated AD bank is also required to ensure that raising / utilisation of ECB is in compliance with ECB guidelines at the time of certification. V. CONVERSION OF ECB INTO EQUITY (i) Conversion of ECB into equity is permitted subject to the following conditions: (a) The activity of the company is covered under the Automatic Route for Foreign Direct Investment or Government (FIPB) approval for foreign equity participation has been obtained by the company, wherever applicable (b) The foreign equity holding after such conversion of debt into equity is within the sectoral cap, if any, (c) Pricing of shares is as per the pricing guidelines issued under FEMA, 1999 in the case of listed/unlisted companies. (ii) Conversion of ECB may be reported to the Reserve Bank as follows: (a) Borrowers are required to report full conversion of outstanding ECB into equity in the form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in form ECB-2 submitted to the DSIM, RBI within seven working days from the close of month to which it relates. The words "ECB wholly converted to equity" should be clearly indicated on top of the ECB-2 form. Once reported, fil....
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....pproval and the automatic routes, subject to the condition that the average maturity period, as declared while obtaining the LRN, is maintained. The changes in the drawdown/repayment schedule should be promptly reported to the DSIM, RBI in Form 83. However, any elongation/rollover in the repayment on expiry of the original maturity of the ECB would require the prior approval of the Reserve Bank. (b) Changes in the currency of borrowing Designated AD Category-l banks may allow changes in the currency of borrowing, if so desired, by the borrower company, in respect of ECBs availed of both under the automatic and the approval routes, subject to all other terms and conditions of the ECB remaining unchanged. Designated AD banks should, however, ensure that the proposed currency of borrowing is freely convertible. (c) Change of the AD bank Designated AD Category-l banks may allow change of the existing designated AD bank by the borrower company for effecting its transactions pertaining to the ECBs subject to No-Objection Certificate (NOC) from the existing designated AD bank and after due diligence. (d) Changes in the name of the Borrower Company Designated AD Category-....
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....s permissible under Foreign Trade Policy (except gold, palladium, platinum, Rodium, silver etc.) and up to three years for import of capital goods, subject to prudential guidelines issued by Reserve Bank from time to time. The period of such Letters of credit / guarantees / LOU / LoC has to be co-terminus with the period of credit, reckoned from the date of shipment. d) Reporting Arrangements AD banks are required to furnish details of approvals, drawal, utilisation, and repayment of trade credit granted by all its branches, in a consolidated statement, during the month, in form TC (format in Annex IV) from April 2004 onwards to the Director, Division of International Finance, Department of Economic Analysis and Policy, Reserve Bank of India, Central Office Building, 8th floor, Fort, Mumbai - 400 001 (and in MS-Excel file through email to [email protected]) so as to reach not later than 10th of the following month. Each trade credit may be given a unique identification number by the AD bank. AD banks are required to furnish data on issuance of LCs / guarantees / LoU / LoC by all its branches, in a consolidated statement, at quarterly intervals (format in Annex V)....
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....Repayment of Principal Month Year Interest Payment Amount Month Year Amount PART D-ADDITIONAL INFORMATION ・ 1. Information about the project i) Name & location of the project ii) Total cost of the project Rs. USD iii) Total ECB as a % of project cost Nature of the project v) Whether Appraised by financial institution/bank vi) a) Power Infrastructure Sector b) Telecommunication c) Railways d) Roads including bridges e) Ports f) Industrial parks g) Urban infrastructure - Water supply, Sanitation and sewerage. Whether requires clearance from any : statutory authority? If yes, furnish vii) the name of authority, clearance no. and date. 31 32 of 50 2. ECB availed in the current & previous three financial years-(not applicable for the first time borrower) Year Registration No. Currency Loan Amount Amount outstanding* * net of repayments, if any, on the date of application. Amount disbursed PART E-CERTIFICATIONS 1. By the applicant We hereby certify that (i) the particulars given above are true and correct to the best of our knowledge and belief and (ii) the ECB to be raised will be utilised for permitted purposes. Place Name: Date Sta....
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....y Code ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬(SWIFT) (For RBI Use) Guarantor (Name, Address, contact number etc. ) 33 34 of 50 (1) (Use code as per Box Multi Currency Type Name and address of the Borrower (Block Letters) Contact Person's Name: Name and address of lender / foreign supplier / lesser (Block Letters) Designation: Phone No. : Fax no. E-mail ID: (For RBI DESACS use) Country: E-mail ID: Borrower's Category (Tick in appropriate box) Lender's Category Public Sector Unit Private Sector Unit (For RBI DESACS use) Detailed category (tick below) Bank NBFC Reg. No. Financial Institution (Other than NBFC) Corporate NGOs engaged in micro finance activity Other (Specify) Details of foreign equity holding of the lender in borrower company: (a)Share in paid-up equity of the borrower (%) Specify Authorised Dealer's Name, and bank code Bank Code Part I: Multi-lateral Financial Institution Foreign Government (Bilateral Agency) Export Credit Agency Indian Commercial Bank branch abroad Other Commercial Bank Supplier of Equipment Leasing Company Foreign Collaborator....
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....f Put Percent of Option : Debt Option Debt Note: In the case of annuity payments, please indicate each equal installment of principal and interest amount with rate. In the case of principal repayment using a percentage profile, percentages may also be indicated. Penal Interest for late payment Commitment Charges Margin: Fixed % per annum or Base : % per annum of : % of Undrawn Amount Other Charges Nature of Charge Expected Currency Amount (Specify) Date of Payment In case of many equal payments No. of payments in a year Total number of payments PART D: ECB availed in the current & previous three financial years-(not applicable for the first time borrower) Year Registration No. Currency Loan Amount Amount disbursed Amount outstanding* * net of repayments, if any, on the date of application. We hereby certify that the particulars given above are true and correct to the best of our knowledge and belief. No material information has been withheld and / or misrepresented. Place: Date: Stamp (Signature of the Authorised Official of the Company) Name: Designation: (Signature of Company Secretary / Chartered Accountant) Stamp Name : [Fo....
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....TEMS 463 ELECTRONIC VALVES, TUBES & OTHERS 464 OTHERS 469 CHEMICALS & ALLIED PRODUCTS (470) FERTILIZERS 471 DYES & DYES STUFF 472 MEDICINES & PHARMACEUTICALS 473 PAINTS & WARNISHING 474 SOAPS, DETERGENTS, SHAMPOOS, SHAVING PRODUCT 475 OTHERS 479 OTHERS of Manufacturing (480) CEMENT 481 OTHER BUILDING MATERIALS 482 LEATHER & LEATHER PRODUCTS 483 WOOD PRODUCTS 484 RUBBER GOODS 485 PAPER & PAPER PRODUCTS 486 TYPEWRITERS & OTHER OFFICE EQUIPMENT 487 PRINTING & PUBLISHING 488 MISCELLANEOUS 489 TRADING PROJECTS 500 CONSTRUCTION & TURN KEY 600 TRANSPORT 700 UTILITIES (800) BANKING SECTOR SERVICES TELECOMMUNICATION SERVICES SOFTWARE DEVELOPMENT SERVICES POWER GENERATION, TRANSMISSION & DISTRIBUTION 811 OTHERS 812 888 900 911 912 TECHNICAL ENGINEERING & CONSULTANCY SERVICES TOURS & TRAVEL SERVICES 913 914 COLD STORAGE, CANNING & WAREHOUSING SERVICES 915 MEDIA ADVERTISING & ENTERTAINMENT SERVICES 916 FINANCIAL SERVICES 917 TRANSPORT SERVICES OTHERS (NOT CLASSIFIED ELSEWHERE) 919 999 38 39 of 50 Annex-III ECB - 2 Reporting of actual transactions of External Commercial Borrowings (ECB) under Foreign Exchange Man....
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....on /expansion of existing units Power 21 TS Textile/steel Restructuring Package 22 MF Micro finance activity 23 OT Others (Pl. specify) For source of funds for remittances, following codes are to be used. No. Code BOX 2: Source of Funds for remittance Description 1 A Remittance from India 2 B Account held abroad 3 C 4 D Exports proceeds held abroad Conversion of equity capital LO 5 E Others (Specify) FOR RBI (DESACS) Use only CS-DRMS Team Loan_key Received on Action Taken on Loan Classification Part A: Loan Identification Particulars Loan Registration Number (LRN) Loan Amount As per Agreement Revised Currency Amount 40 40 Borrower Particulars Name and address of the Borrower (Block Letters) Contact Person's Name: Designation: Phone No. : Fax no. E-mail ID: 41 of 50 Part B: Actual Transaction Details 1. Draw-down during the month : Tranche No. Date Currency (YYYY/MM/DD) (Please see note below) Amount Amount of loan committed but not yet drawn at the end of the month (in loan currency) Currency Amount Note: 1. In the case of import of goods or services, date of import may be furnished against date of draw-down....
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....tary / Chartered Accountant We hereby certify that the ECB availed in terms of approval granted by Government or RBI or under approval route / automatic route is duly accounted in the books of accounts. Further, ECB proceeds have been utilised by the borrower for the purpose of We have verified all the related documents and records connected with the utilisation of ECB proceeds and found these to be in order and in accordance with the terms and conditions of the loan agreement and with the approval granted by Gol (MoF) or RBI or under approval route / automatic route and is in conformity with the ECB Guidelines issued by the Government. Authorised Signatory Name & Address Registration No. [Stamp] Certificate by an Authorised Dealer We hereby certify that the information furnished above with regard to debt servicing, outstandings and repayment schedule is true and correct as per our record. The drawal, utilisation and repayment of the ECB have been scrutinised and it is certified that such drawal, utilisation and repayments of ECB are in compliance with ECB guidelines. Name: Date : Designation: Name & Address of Authorised Dealer Uniform Code No. [Stamp] ....
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....edits for imports approved by all our branches during the month-- 2. 3. · have been included in this statement. Related import documents (including EC copy of Bill of Entry) towards utilisation of such trade credits have been verified and found in order. The drawal, utilisation and repayment of all trade credits approved by our branches have been scrutinised and it is cerified that such drawal, utilisation and repayments of trade credits Place:- Date: Signature of Authorised Dealer 46 47 of 50 Statement on Guarantees / Letter of Undertaking / Letter of Comfort issued by Authorised Dealer banks As on quarter ended Name of the AD : Address e-mail: Contact Person: Tel: Fax: Annex V Place: On behalf of Residents (USD million) Guarantees / Letter of Undertaking / Letter of Comfort Issued Buyer's Credit Supplier's Credit Trade Credits (less than 3 years) (a) Up to one year (b) Above one year and less than three years ** ** © (Limited to Import of Capital Goods) Date: [Stamp] Signature of the Authorised Signatory 47 48 of 50 Appendix SI. List of Notification/ A.P. (DIR Series) Circulars which have been consolidated in the Master Circ....