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External
Commercial Borrowings (ECB) - Automatic Approval upto
us $ 50 Million
The
Government of India has further liberalized ECB approvals.
The Government have vide Press Release F.No. 4(32)-2000-ECB
dated September 1, 2000, has decided to operationalise
the automatic route for fresh ECB approvals up to USD
50 million and for refinancing of an existing ECB. .
Accordingly,
under the automatic route arrangement any legal entity
registered under the Companies Act, Societies Registration
Act, Co-operative Societies Act, including proprietorship/
partnership concerns will henceforth be eligible to
enter into loan agreements with overseas lender(s) for
raising fresh ECB with average maturity of not less
than 3 years for an amount up to USD 50 million and
for refinancing an existing ECB provided it is in compliance
with both, ECB guidelines framed by the Ministry of
Finance, Government of India and the regulations/ directions/
circulars issued by Reserve Bank in this regard. No
prior approval is now required from the Ministry of
Finance/Reserve Ban of India for raising ECB up to USD
50 million and for refinancing of an existing ECB.
The
borrower shall ensure that ECB is raised from an internationally
acceptable and/or recognized lender, such as export
credit agencies, suppliers of equipments, foreign collaborators,
foreign equity holders, international capital markets,
reputed international banks and financial institutions,
etc. The lenders should be recognized and registered
in the host countries for the purpose of extending international
finance.
Further,
the loan should be organized through a reputed merchant
banker registered with the regulatory authorities of
the host country, such as, USA, Japan, EU countries,
Singapore, and such other countries as may be notified
from time to time by the Government of India.
The
borrower shall submit through an authorized dealer of
its choice, three copies of the loan agreement (along
with Form ECB and Form 83, in duplicate) to the concerned
Regional Office of the Reserve Bank after signing the
same with the lender. The Regional Office of the Reserve
Bank would acknowledge receipt of the copies of the
agreement and allot a loan identification number to
such an agreement.
The
primary responsibility to ensure that ECB raised is
in conformity with the ECB guidelines and the Reserve
Bank regulations/directions/circulars will be that of
the concerned borrower. If, however, at a later stage,
any violation is found, appropriate action will be taken
by Reserve Bank under the Foreign Exchange Management
Act, 1999.
Necessary
draw - downs by the borrower will also be permitted
under the automatic route without prior permission of
Reserve Bank. The borrower will, however, be required
to file quarterly returns in Form ECB-2 through the
authorized dealer showing the details of drawals, utilization
and repayments made. This is to be submitted within
10 days of the close of the calendar quarter to which
it perains.
The
withholding tax exemptions would continue to be granted
by the Ministry of Finance (Department of Revenue/Department
of Economic Affairs), Government of India.
For
prepayment of outstanding ECBs (viz., 10% of the outstanding
amount during the life of the loan or ECBs with residual
maturity up to one year), prior permission from Reserve
Bank of India, ECB Division, Exchange Control Department,
Central Office, Mumbai will have to be obtained by the
borrower for which application will have to be submitted,
duly forwarded by the authorized dealer.
Opening
of foreign currency account for parking ECB proceeds
temporarily, pending utilization, will require prior
approval of the concerned Regional Office of Reserve
Bank.
The
aforesaid directions are contained in Reserve Bank A.P.
(DIR Series) Circular No. 10 dated 5th September, 2001.
These have been issued by Reserve Bank under Section
10(4) and Section 11(1) of the Foreign Exchange Management
Act, 1999 and any contravention or non-observance thereof
is subject to penalties prescribed under the Act.
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