In the present scenario of globalization and modernization, cross border, transactions have become part & parcel of the routine business activity for any corporate entity and external commercial borrowing ("ECB") is one of the common modes for financing such transactions.
India is one of the most sought countries in terms of international investments. Business has grown multifolds with the increasing foreign participation in Indian business.
Meaning: In common parlance, the term ECB refers to a Loan from outside India. However, as per the master circular issued by the Reserve Bank of India (RBI) it is defined as:
Commercial loans in the form of bank loans, buyers' credit, suppliers' credit, and securitized instruments (e.g. floating rate notes and fixed rate bonds) availed of from non-resident lenders with minimum average maturity of 3 years.
Foreign Currency Convertible Bonds (FCCBs) i.e. a bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency.
Preference shares (i.e. non-convertible, optionally convertible or partially convertible)
Routes for raising ECB: - There are two routes
a. Automatic Route: Following criteria as given under the ECB as per master circular RBI are required to be met simultaneously:
i. Borrowing Limit
ii. Eligible Borrower
iii. Recognized Lender
iv. All-in-cost ceiling
v. End use
b. Approval Route: - If any of criteria given under automatic route are not fulfilled then you have to follow Approval Route
Professionally led team of Kriti Advisory Pvt. Ltd. provides Consultancy & Advisory Services for all Government approvals related to External Commercial Borrowings (ECB) to the Corporate Clients. We can be contacted via e-mail info@kritiadvisory.com or logon to www.kritiadvisory.com