Please find latest amendment in ECB Policy-Revised Maximum Permissible limit for ECB , Bridge Finance for Infrastructure sector can be refinanced with an ECB, Trade Credits for Import into India.
Find below circular for your reference:
EXTERNAL COMMERCIAL BORROWINGS (ECB) POLICY - REPAYMENT OF RUPEE LOANS AND/OR FRESH RUPEE CAPITAL EXPENDITURE - USD 10 BILLION SCHEME
A.P. (DIR SERIES 2012-13) CIRCULAR NO. 26, DATED 11-9-2012
Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No. 134, dated June 25, 2012.
2. As per the extant guidelines, the maximum permissible ECB that can be availed of by an individual company under the scheme is limited to 50 per cent of the average annual export earnings realised during the past three financial years.
3. On a review, it has been decided:
(a) to enhance the maximum permissible limit of ECB that can be availed of to 75 per cent of the average foreign exchange earnings realized during the immediate past three financial years or 50 per cent of the highest foreign exchange earnings realized in any of the immediate past three financial years, whichever is higher;
(b) in case of Special Purpose Vehicles (SPVs), which have completed at least one year of existence from the date of incorporation and do not have sufficient track record/past performance for three financial years, the maximum permissible ECB that can be availed of will be limited to 50 per cent of the annual export earnings realized during the past financial year; and
(c) The maximum ECB that can be availed by an individual company or group, as a whole, under this scheme will be restricted to USD 3 billion.
4. All other aspects of the scheme mentioned in A.P. (DIR Series) Circular No. 134, dated June 25, 2012 would remain unchanged.
5. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
EXTERNAL COMMERCIAL BORROWINGS (ECB) POLICY - BRIDGE FINANCE FOR INFRASTRUCTURE SECTOR
A.P. (DIR SERIES 2012-13) CIRCULAR NO. 27, DATED 11-9-2012
Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No. 26 dated September 23, 2011.
2. As per the extant guidelines, Indian companies in the infrastructure sector, where "infrastructure" is as defined under the extant guidelines on External Commercial Borrowings (ECB), have been allowed to import capital goods by availing of short term credit (including buyers'/suppliers' credit) in the nature of 'bridge finance', under the approval route, subject to the following conditions:-
(i) the bridge finance shall be replaced with a long term ECB;
(ii) the long term ECB shall comply with all the extant ECB norms; and
(iii) prior approval shall be sought from the Reserve Bank for replacing the bridge finance with a long term ECB.
3. On a review, it has been decided to allow refinancing of such bridge finance (if in the nature of buyers'/suppliers' credit) availed of, with an ECB under the automatic route subject to the following conditions:-
(i) the buyers'/suppliers' credit is refinanced through an ECB before the maximum permissible period of trade credit;
(ii) the AD evidences the import of capital goods by verifying the Bill of Entry;
(iii) the buyers'/suppliers' credit availed of is compliant with the extant guidelines on trade credit and the goods imported conform to the DGFT policy on imports; and (iv) the proposed ECB is compliant with all the other extant guidelines relating to availment of ECB.
4. The borrowers will, therefore, approach the Reserve Bank under the approval route only at the time of availing of bridge finance which will be examined subject to conditions mentioned in para 2(i) and (ii).
5. The designated AD - Category I bank shall monitor the end-use of funds and banks in India will not be permitted to provide any form of guarantees for the ECB. All other conditions of ECB, such as eligible borrower, recognized lender, all- in-cost, average maturity, end-use, maximum permissible ECB per financial year under the automatic route, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged and should be complied with.
6. The amended ECB policy will come into force with immediate effect and is subject to review.
7. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
8. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
TRADE CREDITS FOR IMPORT INTO INDIA
CIRCULAR NO. A.P. (DIR SERIES 2012-13) CIRCULAR NO. 28, DATED 11-9-2012
Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No. 87, dated April 17, 2004 andA.P. (DIR Series) Circular No. 24, dated November 1, 2004.
2. As per the extant guidelines, for import of capital goods as classified by DGFT, AD banks may approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years (from the date of shipment). No roll over/extension is permitted beyond the permissible period. AD banks are also permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU)/Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution, up to USD 20 million per transaction for a period up to three years for import of capital goods, subject to prudential guidelines issued by the Reserve Bank from time to time. The period of such Letters of credit/guarantees/LoU/LoC has to be co-terminus with the period of credit, reckoned from the date of shipment. AD banks shall not, however, approve trade credit exceeding USD 20 million per import transaction.
3. On a review, it has been decided to allow companies in the infrastructure sector, where "infrastructure" is as defined under the extant guidelines on External Commercial Borrowings (ECB) to avail of trade credit up to a maximum period of five years for import of capital goods as classified by DGFT subject to the following conditions: -
(i) the trade credit must be abinitio contracted for a period not less than fifteen months and should not be in the nature of short-term roll overs; and
(ii) AD banks are not permitted to issue Letters of Credit/guarantees/Letter of Undertaking (LoU)/Letter of Comfort (LoC) in favour of overseas supplier, bank and financial institution for the extended period beyond three years.
4. The all-in-cost ceilings of trade credit will be as under:
| Maturity period | All-in-cost ceilings over 6 months LIBOR* |
| Up to one year | 350 basis points |
| More than one year and up to three years | |
| More than three years and up to five years |
* for the respective currency of credit or applicable benchmark
The all-in-cost ceilings include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any.
5. All other aspects of Trade Credit policy will remain unchanged and should be complied with. The amended trade credit policy will come into force with immediate effect and is subject to review based on the experience gained in this regard.
6. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 are being issued separately wherever necessary.
7. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
8. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
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