External commercial borrowing

A prospective borrower can access ECB under two routes, namely the automatic route and the approval route. A corporate, other than a financial intermediary, registered under the Companies Act, 1956, can access ECB under the automatic route up to US Dollar $ 500 million in a financial year both for rupee expenditure and / or foreign currency expenditure for permissible end uses. The borrowers in the services sector viz. hotels, hospitals and software companies can access ECB under the automatic route up to US$ 100 million in a financial year for import of capital goods, for rupee and / or foreign currency capital expenditure and NGOs engaged in micro finance activities up to US$ 5 million in a financial year. Infrastructure sector includes power, telecommunication including manufacturing of telecom equipment, railways, roads including bridges, ports including air port & sea port, industrial parks, urban infrastructure (such as water supply, sanitation & sewage projects), mining, exploration & refining and "cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products & meat".

The ECB which is not covered by the automatic route is considered under the approval route on a case-by-case basis by RBI.

ECB policy is operationalised through notifications issued by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act, 1999. These can be accessed on RBI's website.

The broad details of ECB policy(33 KB)

ECB policy is operationalised through notifications issued by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act, 1999. These can be accessed on RBI's website

3. The norms applicable to ECB are also applicable to Foreign Currency Convertible Bonds (FCCBs) in all respects, except in the case of housing finance companies for which criteria will be notified by RBI.

4. As per the extant norms, Infrastructure Finance Companies (IFCs) i.e. Non Banking Financial Companies (NBFCs) categorized as IFCs by the Reserve Bank were permitted to avail of ECBs for on-lending to the infrastructure sector, as defined in the extant ECB policy, under the approval route. On a review undertaken in April-May 2010, as a measure of liberalization of the existing procedures, it has been decided to permit the IFCs to avail of ECBs, including the outstanding ECBs, up to 50 per cent of their owned funds under the automatic route, subject to their compliance with the prudential guidelines already in place. ECBs by IFCs above 50 per cent of their owned funds would require the approval of the Reserve Bank and will, therefore, be considered under the approval route. [RBI/2009-10/456 - A. P. (DIR Series) Circular No. 51 dated May 11, 2010 issued by RBI under FEMA]

5. As per the extant norms, refinancing of domestic Rupee loans with ECB was not permitted. However, keeping in view the special funding needs of the infrastructure sector, it has been decided to put in place a scheme of take-out finance arrangement through ECB, under the approval route, for refinancing of Rupee loans availed of from the domestic banks by eligible borrowers in the sea port and airport, roads including bridges and power sectors for the development of new projects, subject to conditions stipulated by RBI in its A.P.(DIR Series) Circular No.04 dated July 22, 2010.