RBI asks companies to give details of ECB fund utilisation

RBI asks companies to give details of ECB fund utilisation

The Reserve Bank asked companies to divide utilisation of funds raised through External Commercial Borrowings (ECBs) under the heads of foreign currency and rupee expenditure.

"On a review, it has been decided that at the time of availing Loan Registration Number (LRN) from the Reserve Bank, borrowers should provide bifurcation of the utilisation of the ECB proceeds towards foreign currency and rupee expenditure," RBI said in a notification.

In November, 2011, RBI had asked corporates to park funds raised through ECBs for domestic expenditure with local banks.

Such funds could be used for local sourcing of capital goods, on-lending to self-help groups or for micro credit and payment for spectrum allocation, among other purposes.

"The primary responsibility to ensure that the ECB proceeds meant for Rupee expenditure in India are repatriated to India for credit to their Rupee accounts," the RBI said.

Courtesy : PTI 7 May 2012

External Commercial Borrowings (ECB) in Renminbi (RMB)- Under Approval Route

RBI/2011-12/205-A.P. (DIR Series) Circular No. 30- 30th September 2011

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, amended from time to time, the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 notified vide Notification No. FEMA.14/2000-RB dated May 3, 2000, amended from time to time and the A.P. (DIR Series) Circular No. 5 dated August 1, 2005, amended from time to time relating to the External Commercial Borrowings (ECB).

2. Considering the specific needs of the infrastructure sector, the existing ECB policy has been reviewed in consultation with the Government of India and it has been decided to allow Indian companies which are in the infrastructure sector, where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB), to avail of ECBs in Renminbi (RMB), under the approval route, subject to an annual cap of USD one billion pending further review.

3. Once approved, the approval of the Reserve Bank will be valid for a period of three months from the date of issue of the approval letter and the loan agreement should be executed within the validity period. The company may thereafter submit the completed Form 83 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India for allotment of loan registration number (LRN) within seven days (from the date of signing the loan agreement between the borrower and the lender). In case the borrower fails to obtain LRN within the above period, the approval of the Reserve Bank will stand cancelled.

4. AD Category- I bank will be permitted to open Nostro accounts in Renminbi (RMB). The designated AD – Category I bank shall monitor the end-use of funds and bank(s) in India will not be permitted to provide any form of guarantee(s). All other conditions of ECB, such as eligible borrower, recognized lender, all-in-cost, average maturity, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged and shall be complied with.

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.

AUTHORISED DEALERS ( BANKS) HAVE NOW POWER TO APPROVE CHANGES IN ECB TERMS & CONDITIONS

AUTHORISED DEALERS ( BANKS) HAVE NOW POWER TO APPROVE CHANGES IN ECB TERMS & CONDITIONS

Changes / modifications in the drawdown / repayment schedule of the ECBs already availed, both under the approval and the automatic routes is simplified now.

As per the extant ECB procedures, any changes in the terms and conditions of the ECB after obtaining the Loan Registration Number (LRN) from the Department of Statistics and Information Management (DSIM), Reserve Bank, require the prior approval of the Reserve Bank. Accordingly, the requests of the borrowers for changes in the terms and conditions, such as, drawdown / repayment schedules, currency of borrowing and changes in designated AD bank, name of the borrowing company, etc. are referred to the Reserve Bank for necessary approval.

As a measure of simplification of the existing procedures, it has been decided to delegate powers to the designated AD category-I banks to approve the following requests from the ECB borrowers, subject to specified conditions:
a) Changes / modifications in the drawdown / repayment schedule

Designated AD Category – I banks may approve changes / modifications in the drawdown / repayment schedule of the ECBs already availed, both under the approval 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, Reserve Bank 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 I 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 - I 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 - I banks may allow changes in the name of the borrower company subject to production of supporting documents evidencing the change in the name from the Registrar of Companies.