CHANGES IN ECB 2 RETURN FOR ACCOMODATING FINANCIAL HEDGING DETAILS

External Commercial Borrowings (ECB) – Reporting arrangements

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, as amended from time to time and A.P. (DIR Series) Circular No.60 dated January 31, 2004 relating to reporting arrangements for ECB.

2. In order to capture details of the financial hedges contracted by corporates, of their foreign currency exposure relating to ECB and their foreign currency earnings and expenditure, the format of ECB-2 Return has been modified (Part-E) and the same has been given in the Annex. The reporting in the modified ECB-2 Return will be applicable from the return of the month April 2014 onwards.

3. There is no change in the reporting procedure and corporates raising ECB continue to submit ECB-2 Return on a monthly basis duly certified by the designated AD Category-I bank so as to reach Department of Statistics and Information Management (DSIM) of Reserve Bank of India within seven working days from the close of month to which it relates.

PROCEDURE FOR CONVERSION OF ECB INTO EQUITY

CONVERSION OF ECB INTO EQUITY

 

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, filing of ECB-2 in the subsequent months is not necessary.

(b) In case of partial conversion of outstanding ECB into equity, borrowers are required to report the converted portion in form FC-GPR to the Regional Office concerned as well as in form ECB-2 clearly differentiating the converted portion from the unconverted portion. The words "ECB partially converted to equity" should be indicated on top of the ECB-2 form. In subsequent months, the outstanding portion of ECB should be reported in ECB-2 form to DSIM.

Following requirements have to be taken into account:

1.Consent letter from the ECB lenders for the conversion into equity

2. Board Resolution for the conversion

3.Reporting the Conversion to DSIM in ECB-2 Return

4. Filing of FC-GPR

 

PROCEDURES FOR AVAILING ECB -EXTERNAL COMMERCIAL BORROWINGS

Before availing ECB , the borrower in India have to obtain LRN ( Loan Registration number ) from RBI under automatic route .

The procedure for obtaining LRN number is as follows:

For allotment of Loan Registration Number (LRN), borrowers are required to submit Form 83, in duplicate, certified by the Company Secretary (CS) or Chartered Accountant (CA) to the designated AD bank. One copy is to be forwarded by the designated AD bank to the Director, Balance of Payments Statistics Division, Department of Statistics and Information Systems (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai – 400 051.

(c) The borrower can draw-down the loan only after obtaining the LRN from DSIM, Reserve Bank.

(d) Borrowers are required to submit ECB-2 Return certified by the designated AD bank on monthly basis so as to reach DSIM, Reserve Bank within seven working days from the close of month to which it relates.

Please note that  previous returns relating to ECB viz. ECB 3 – ECB 6 have been discontinued with effect from January 31, 2004.


Under automatic approval route , the following futher procedures have to be adhered :

* Board Resolution towards the ECB application.

* Loan Agreement to be entered with Recognized Lender.

* Documents related to application of LRN (Loan Registration Number) by filing Form 83 in duplicate duly certified by any Practicing Professional

*  The Certificate of Due Diligence to be submitted by the Overseas Organizations  / Individual Lender to AD Bank of Indian company (Borrower)

* Form 83 duly filled

* No Objection by AD Category I bank in case of creation of charge on immovable property if any.

* ECB Return - 2 on monthly basis once ECB is availed.