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  • What are the hedging requirements under External commercial borrowing?

    Companies in infrastructure sector, Non-Banking Financial Companies -Infrastructure Finance Companies (NBFC-IFCs), NBFCs-Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies (CICs) are eligible borrowers. These companies are required to:

    1. Have a board-approved risk management policy and will require to keep their ECB exposure hedged 100 per cent at all times in case the average maturity is less than 5 years.
    2. Further, the designated AD Category-I bank shall verify that 100 per cent hedging requirement is complied with during the currency of ECB and report the position to RBI through ECB 2 returns.
    3. Lastly, the entities raising ECB under the provisions of tracks I and II are required to follow the guidelines for hedging issued, if any, by the concerned sectoral or prudential regulator in respect of foreign currency exposure.

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  • What does External Commercial Borrowing (ECB) denote?

    ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities conforming to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

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  • Are the shipping/airline companies allowed to raise External Commercial Borrowing for import of second hand vessels?

    Yes, shipping and airline companies can raise external commercial borrowings (ECB) for import of vessels and aircrafts, however, only under Track I of the ECB framework.

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  • What is the earliest when an External Commercial Borrowing can be matured?

    Minimum average maturity period (MAMP) is three years for all external commercial borrowings (ECB). However, for ECB raised from foreign equity holder and utilised for specific purposes, as detailed in sub-section 2.1 of the Annex, the MAMP is five years. Similarly, for ECB up to INR 3.5 b per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP is one year.

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  • Can External Commercial Borrowing be used for funding real estate?

    No, no activity under real estate is permitted as eligible end use for raising ECB.

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  • What are the various types of ECB?

    ECB includes Loans, Securitized instruments, Buyers’ and supplier’s credit, Foreign Currency Convertible Bonds (FCCBs). Financial Lease and Foreign Currency Exchangeable Bonds (FCEBs). 

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  • Can External Commercial Borrowing be used for importing services?

    No, ECB is not permitted for import of services.

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  • Can External Commercial Borrowing be used for making contribution in Limited Liability Partnership?

    No, it is not permitted under any track.

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  • Could a qualified borrower raise crisp External Commercial Borrowings under Track II for reimbursement of existing Rupee named External Commercial Borrowings?

    Refinancing of Rupee denominated ECB with Foreign Currency denominated ECB under Track II is not permitted.

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  • What are the regulations on Remittance on winding up/liquidation of Companies?

    AD Category-I banks have been allowed to remit winding up proceeds of companies in India, which are under liquidation, subject to payment of applicable taxes. Liquidation may be subject to any order issued by the court winding up the company or the official liquidator in case of voluntary winding up under the provisions of the Companies Act 2013 as applicable. AD Category-I banks shall allow the remittance provided the applicant submits:

    a) No objection or Tax clearance certificate from Income Tax Department for the remittance.

    b) Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for.

    c) Auditor's certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, as applicable.

    d) In case of winding up otherwise than by a court, an auditor's certificate to the effect that there are no legal proceeding spending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance.

    Please refer to subsection 1.1(iii) of Annexure-6 of Consolidated FDI Policy at link for more information.

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  • Are NRIs(Non-Resident Indians) allowed to invest in sole proprietorship in India?

    NRI or a person of Indian origin (PIO) can invest in sole proprietorship / partnership firm on non-repatriable basis, except those in agricultural or plantation or real estate business, or in the print media sector. NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation option.

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  • Is transfer of shares to non-residents/ NRIs permitted as per the FDI policy?

    General permission is granted to non-residents/ NRIs for acquisition of shares by way of transfer in the following situations:

    1) Transfer of shares in the investee company from one non-resident to another non-resident in sectors which are under automatic route. Government approval is required for transfer of stake from one non-resident to another non-resident in sectors which are under Government approval route

    2) NRIs may transfer by way of sale or gift shares or convertible debentures to another NRI

    3) Person resident outside India can transfer any security to a person resident in India by way of gift

    4) A person resident outside India can sell shares and convertible debentures of an Indian company on a recognized Stock Exchange in India through a registered stock broker or a registered merchant banker

    5) A person resident in India can transfer by way of sale, shares/ convertible debentures (including transfer of subscriber’s shares), of an Indian company under private arrangement to a person resident outside India, subject to the FDI Policy guidelines

    6) Transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the FDI guidelines

    7) The above mentioned situations also covers transfer by a resident to a non-resident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company.

    Please refer to section 4 of Annexure-3 of Consolidated FDI Policy at link for more information.

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  • Who is a Foreign Venture Capital Investor (FVCI)?

    FVCI refers to an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI (FVCI) Regulations} and proposes to make investments in accordance with FDI Regulations.

    For more information, click here.

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  • What is debt restructuring of advances?

    Debt restructuring is an act in which a lender, for economic or legal reasons relating to the borrower's financial difficulty, grants concessions to the borrower. Restructuring normally involves modification of terms of the advances/ securities, which would generally include, among others, alteration of repayment period, repayable amount, the number/amount of installments, rate of interest, roll over of credit facilities, sanction of additional credit facility, enhancement of existing credit limits, compromise settlements where time for payment of settlement amount exceeds three months.

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  • Would I be able to get financing support from Make in India?

    The Make in India initiative was launched by Prime Minister in September 2014 as part of a wider set of nation-building initiatives.

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  • Is it possible for Indian Companies to issue employees' stock option and/or sweat equity shares?

    Yes, an Indian company may issue “employees’ stock option” and/or “sweat equity shares” to its employees/ directors or employees/ directors of its holding company or joint venture or wholly owned overseas subsidiary/ subsidiaries who are resident outside India subject to provisions contained in Companies Act 2013 and SEBI Act 1992.

    For more information, click here

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  • What is the procedure for reporting of transfer of shares?

    Reporting of transfer of shares between residents and non-residents and vice- versa is to be done in Form FC-TRS (Section-4). The Form FC-TRS should be submitted to the AD Category-I bank, within 60 days from the date of receipt of the amount of consideration.

    For more information, click here.

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  • What is the procedure for reporting the issue of shares against conversion of External Commercial Borrowing?

    In case of partial or full conversion of external commercial borrowing (ECB) into equity, the reporting to the Reserve Bank of India (RBI) happens as under:

    • For partial conversion -  Converted portion to be reported to the concerned Regional Office of the Foreign Exchange Department of RBI in Form FC-GPR, while monthly reporting to the Department of Statistics and Information Management (DSIM) in ECB 2 Return (Annex III)
    • For full conversion - Entire portion is to be reported in Form FC-GPR, while reporting to DSIM in ECB 2 Return.
    • For conversion in phases - Reporting through ECB 2 Return will also be in phases

    For more information, click here. 

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  • What is the duration within which capital instruments need to be issued, post receiving inward remittances?

    The capital instruments should be issued within 180 days from the date of receipt of the inward remittance received through normal banking channels including escrow account or by debit to the NRE/FCNR (B) account of the non-resident investor. In case, the capital instruments are not issued within this time, the amount received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be. Non-compliance to this would be reckoned as a contravention under the Foreign Exchange Management Act and would attract penal provisions. In exceptional cases, refund of the amount outstanding beyond 180 days from the date of receipt may be considered by the Reserve Bank of India on the merits of the case.

    For more information, click here

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