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Corporates under Investigation are not allowed to access ECB under the Automatic route

RBI/2012-13/429
A.P. (DIR Series) Circular No. 87

March 5, 2013

To

All Category – I Authorised Dealer Banks

Madam / Sir,

External Commercial Borrowings (ECB) Policy
Corporates under Investigation

Attention of Authorized Dealer Category – I (AD Category – I) banks is invited to the A.P. (DIR Series) Circular No. 71 dated June 30, 2009 and Third Amendment to FEMA Notification No.3 (FEMA 197/2009-RB) dated September 22, 2009.

2. As per the extant guidelines, corporates that are under investigation by any law enforcing agencies like the Directorate of Enforcement (DoE), etc. are not allowed to access ECB under the Automatic route. Any request by such corporates for ECB is examined by the Reserve Bank under the approval route.

3. On a review, it has been decided to permit all entities to avail of ECBs under the automatic route as per the current norms, notwithstanding the pending investigations / adjudications / appeals by the law enforcing agencies, without prejudice to the outcome of such investigations / adjudications / appeals. Accordingly, in case of all applications where the borrowing entity has indicated about the pending investigations / adjudications / appeals, Authorised Dealers while approving the proposal shall intimate the concerned agencies by endorsing the copy of the approval letter. The same procedure will be followed by the Reserve Bank of India also while approving such proposals.

4. The modifications to the ECB guidelines will come into force with immediate effect. All other aspects of the ECB policy, under the Automatic route such as amount of ECB, eligible borrower, recognised lender, end-use, all-in-cost ceiling, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

5. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 have been issued vide Notification No. FEMA.256/2013-RB dated February 06, 2013, notified vide G.S.R.No.125(E) dated February 26, 2013.

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 (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully

(Rudra Narayan Kar)
Chief General Manager-in-Charge

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Related Circulars

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RBI/2012-13/429
A.P. (DIR Series) Circular No. 87

March 5, 2013

To

All Category – I Authorised Dealer Banks

Madam / Sir,

External Commercial Borrowings (ECB) Policy
Corporates under Investigation

Attention of Authorized Dealer Category – I (AD Category – I) banks is invited to the A.P. (DIR Series) Circular No. 71 dated June 30, 2009 and Third Amendment to FEMA Notification No.3 (FEMA 197/2009-RB) dated September 22, 2009.

2. As per the extant guidelines, corporates that are under investigation by any law enforcing agencies like the Directorate of Enforcement (DoE), etc. are not allowed to access ECB under the Automatic route. Any request by such corporates for ECB is examined by the Reserve Bank under the approval route.

3. On a review, it has been decided to permit all entities to avail of ECBs under the automatic route as per the current norms, notwithstanding the pending investigations / adjudications / appeals by the law enforcing agencies, without prejudice to the outcome of such investigations / adjudications / appeals. Accordingly, in case of all applications where the borrowing entity has indicated about the pending investigations / adjudications / appeals, Authorised Dealers while approving the proposal shall intimate the concerned agencies by endorsing the copy of the approval letter. The same procedure will be followed by the Reserve Bank of India also while approving such proposals.

4. The modifications to the ECB guidelines will come into force with immediate effect. All other aspects of the ECB policy, under the Automatic route such as amount of ECB, eligible borrower, recognised lender, end-use, all-in-cost ceiling, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

5. Necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated May 3, 2000 have been issued vide Notification No. FEMA.256/2013-RB dated February 06, 2013, notified vide G.S.R.No.125(E) dated February 26, 2013.

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 (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully

(Rudra Narayan Kar)
Chief General Manager-in-Charge

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RBI/2008-09/517
A.P. (DIR Series) Circular No.71

June 30, 2009

To

All Category – I Authorised Dealer Banks
Madam / Sir,

External Commercial Borrowings (ECB) Policy

Attention of Authorized Dealer Category – I (AD Category – I) banks is invited to the A.P. (DIR Series) Circular No. 46 dated January 2, 2009 relating to External Commercial Borrowings (ECB).

2. On a review, it has been decided to modify some aspects of the ECB policy as indicated below:

(i) ECB for Integrated Township

As per the extant policy, corporates, engaged in the development of integrated township, as defined in Press Note 3 (2002 Series) dated January 04, 2002, issued by DIPP, Ministry of Commerce & Industry, Government of India are permitted to avail of ECB, under the Approval route, until June 2009. On a review of the prevailing conditions, it has been decided to extend the permission up to December 31, 2009, under the Approval route. All other terms and conditions, stipulated in the A.P. (DIR Series) circular referred to above, remain unchanged.

(ii) ECB for NBFC sector

As per the current ECB norms, Non-Banking Finance Companies (NBFCs), which are exclusively involved in financing of the infrastructure sector, are permitted to avail of ECBs from multilateral / regional financial institutions and Government owned development financial institutions for on-lending to the borrowers in the infrastructure sector under the Approval route, subject, inter-alia, to the condition that the direct lending portfolio of these lenders vis-à-vis their total ECB lending to NBFCs, at any point of time, should not be less than 3:1. It has now been decided to dispense with this condition with effect from July 1, 2009. The proposals will, however, continue to be examined by the Reserve Bank under the Approval route, as hitherto.

(iii) ECB for Development of Special Economic Zone

As per the extant guidelines, ECB is permissible for the Infrastructure sector, which is defined as (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport, (vi) industrial parks, (vii) urban infrastructure (water supply, sanitation and sewage projects) and (viii) mining, refining and exploration. Further, units in the Special Economic Zone (SEZ) are also permitted to access ECBs for their own requirements. However, ECB is not permissible for the development of SEZ. It has now been decided to allow SEZ developers also to avail of ECB under the Approval route for providing infrastructure facilities, as defined in the ECB policy, within the SEZ. However, ECB shall not be permissible for development of integrated township and commercial real estate within the SEZ.

(iv) Corporates under Investigation

Currently, the ECB policy is not explicit about accessing of ECB by the corporates, which have violated the extant ECB policy and are under investigation by the Reserve Bank and / or Directorate of Enforcement. It is clarified that corporates, which have violated the extant ECB policy and are under investigation by Reserve Bank and / or by Directorate of Enforcement, will not be allowed to access the Automatic route for ECB. Any request by such corporates for ECB will be examined under the Approval route.

3. The modifications to the ECB guidelines will come into force with immediate effect. All other aspects of the ECB policy, such as USD 500 million limit per company per financial year under the Automatic route, eligible borrower, recognised lender, end-use, all-in-cost ceiling, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

4. Necessary amendments to the Notification No.FEMA.3/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 are being issued separately.

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 (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

( Salim Gangadharan )
Chief General Manager-in-charge

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RESERVE BANK OF INDIA
(FOREIGN EXCHANGE DEPARTMENT)
CENTRAL OFFICE
MUMBAI

Notification No.FEMA.256/2013-RB

February 06, 2013

Foreign Exchange Management
(Borrowing or Lending in Foreign Exchange)
(Amendment) Regulations, 2013

In exercise of the powers conferred by clause (d) of sub-section (3) of Section 6, and sub section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 (Notification No.FEMA.3/2000-RB dated May 3, 2000), namely:-

1. Short title and commencement:

(a) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2013

(b) They shall come into force from the date of their publication in the Official Gazette.

2. Amendment of the Schedule I

In the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 (Notification No.FEMA.3/2000-RB dated May 3, 2000) (hereinafter referred to as ˜the principal regulations™), in Schedule I, in paragraph (1), in sub-paragraph (i), the provision after each of the clause (a), (b) and (c) shall be substituted by the following:-

provided in case the entity is under investigation / adjudications / appeals by the law enforcing agencies, for violation of any of the provision of the regulations under the Act, it shall indicate to the Authorized Dealers (ADs) about pendency of investigations / adjudications / appeals, while availing foreign currency borrowing.

(Dr. Sujatha Elizabeth Prasad)
Chief General Manager-In-Charge


Foot Note:

The Principal Regulations were published in the Official Gazette vide No. G.S.R. No.386 (E) dated May 5, 2000 in Part II, Section 3, sub-section (i) and subsequently amended vide:

  1. No. G.S.R.674 (E) dated August 25, 2000
  2. No. G.S.R.476 (E) dated July 8, 2002
  3. No. G.S.R.854 (E) dated December 31, 2002
  4. No. G.S.R.531 (E) dated July 9, 2003
  5. No. G.S.R.533 (E) dated July 9, 2003
  6. No. G.S.R.208 (E) dated March 23, 2004
  7. No. G.S.R.825 (E) dated December 22, 2004
  8. No. G.S.R.60   (E) dated February 9, 2005
  9. No. G.S.R.739 (E) dated December 22, 2005
  10. No. G.S.R.663 (E) dated October 16, 2007
  11. No. G.S.R.61 (E) dated January 30, 2009
  12. No. G.S.R.547(E) dated July 27, 2009
  13. No. G.S.R. 836(E) dated November 23, 2009
  14. No. G.S.R.No.610 (E) dated August 03, 2012
  15. No. G.S.R.No.832(E) dated November 17, 2012
  16. No. G.S.R.No.886 (E) dated December 11, 2012
  17. No. G.S.R.No.916 (E) dated December 21, 2012

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Foreign Exchange Management ( Borrowing or lending in foreign exchange) Regulations, 2000

Notification No.FEMA 3 /2000-RB dated 3rd May 2000

RESERVE BANK OF INDIA

( EXCHANGE CONTROL DEPARTMENT )

CENTRAL OFFICE

Mumbai 400 001

In exercise of the powers conferred by clause (d) of Sub-Section (3) of Section 6, sub- section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the following regulations for borrowing or lending in foreign exchange by a person resident in India; namely:

1. Short Title and Commencement:-

(i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000.

(ii) They shall come into force on 1st day of June, 2000.

2. Definitions:-

In these regulations, unless the context otherwise requires –

a) ‘Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);.

b) ‘authorised dealer’ means a person authorised as an authorised dealer under sub- section (1) of section 10 of the Act;

c) ‘EEFC account’, ‘RFC account’ mean the accounts referred to in the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000;

d) ‘FCNR (B) account’, ‘NRE account’ mean the accounts referred to in the Foreign Exchange Management (Deposit) Regulations, 2000;

e) ‘Indian entity’ means a company or a body corporate or a firm in India;

f) ‘Joint Venture abroad’ means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity;

g) ‘Schedule’ means the Schedule to these Regulations;

h) ‘Wholly owned subsidiary abroad’ means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and whose entire capital is owned by an Indian entity;

i) the words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.

3. Prohibition to Borrow or Lend in Foreign Exchange:-

Save as otherwise provided in the Act, Rules or Regulations made thereunder, no person resident in India shall borrow or lend in foreign exchange from or to a person resident in or outside India:

Provided that the Reserve Bank may, for sufficient reasons, permit a person to borrow or lend in foreign exchange from or to a person resident outside India.

4. Borrowing and Lending in Foreign Exchange by an Authorised dealer:-

(1) An authorised dealer in India or his branch outside India may lend in foreign currency in the circumstances and subject to the conditions mentioned below, namely:

i) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may extend foreign currency loans in the normal course of its banking business outside India;

ii) An authorised dealer may grant loans to his constituents in India for meeting their foreign exchange requirements or for their rupee working capital requirements or capital expenditure subject to compliance with prudential norms, interest rate directives and guidelines, if any, issued by Reserve Bank in this regard;

iii) An authorised dealer may extend credit facilities to a wholly owned subsidiary abroad or a joint venture abroad of an Indian entity;

Provided that not less than 51 per cent of equity in such subsidiary or joint venture is held by the Indian entity subject to compliance with the Foreign Exchange Management(Transfer and Issue of Foreign Security) Regulations, 2000;

iv) An authorised dealer may, in his commercial judgment and in compliance with the prudential norms, grant loans in foreign exchange to his constituent maintaining EEFC Account or RFC Account, against the security of funds held in such account.

v) A branch outside India of an authorised dealer may extend foreign currency loans against the security of funds held in NRE/FCNR deposit accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2000.

vi) Subject to the directions or guidelines issued by the Reserve Bank from time to time, an authorised dealer in India may extend foreign currency loans to another authorised dealer in India.

2) An authorised dealer in India may borrow in foreign currency in the circumstances and subject to the conditions mentioned below, namely:

i) An authorised dealer may borrow from his Head Office or branch or correspondent outside India upto fifteen per cent of his unimpaired Tier I capital or US$ 10 million, whichever is more, subject to such conditions as the Reserve Bank may direct.

Explanation:

For the purpose of clause (i), the aggregate loans availed of by all branches in India of the authorised dealer from his Head Office, all branches and correspondents outside India, shall be reckoned.

ii) An authorised dealer may borrow in foreign currency without limit from his head Office or branch or correspondent outside India for the purpose of replenishing his rupee resources, provided that –

a) the funds borrowed are utilised for his own business operations and are not invested in call money or similar other markets;

b) no repayment of the loan is made without the prior approval of Reserve Bank, which may be granted only if the authorised dealer has no borrowings outstanding either from Reserve Bank or other bank or financial institution in India and is clear of all money market borrowings for a period of at least four weeks prior to the week in which the repayment is made.

iii) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may borrow in foreign currency in the normal course of its banking business outside India, subject to the directions or guidelines issued by the Reserve Bank from time to time, and the Regulatory Authority of the country where the branch is located.

iv) An authorised dealer may borrow in foreign currency from a bank or a financial institution outside India, for the purpose of granting pre-shipment or post-shipment credit in foreign currency to his exporter constituent, subject to compliance with the guidelines issued by the Reserve Bank in this regard.

5. Borrowing and Lending in Foreign Exchange by

persons other than authorised dealer:-

(1) An Indian entity may lend in foreign exchange to its wholly owned subsidiary or joint venture abroad constituted in accordance with the provisions of Foreign Exchange Management (Transfer or issue of foreign security) Regulations, 2000.

(2) A person resident in India may borrow, whether by way of loan or overdraft or any other credit facility, from a bank situated outside India, for execution outside India of a turnkey project or civil construction contract or in connection with exports on deferred payment terms, provided the terms and conditions stipulated by the authority which has granted the approval to the project or contract or export in accordance with the Foreign Exchange Management (Export of goods and services) Regulations, 2000.

(3) An importer in India may, for import of goods into India, avail of foreign currency credit for a period not exceeding six months extended by the overseas supplier of goods, provided the import is in compliance with the Export Import Policy of the Government of India in force.

(4) A person resident in India may lend in foreign currency out of funds held in his EEFC account, for trade related purposes to his overseas importer customer:

Provided that,-

a) the aggregate amount of such loans outstanding at any point of time does not exceed US$ 3 million; and

b) where the amount of loan exceeds US$ 25,000, a guarantee of a bank of international repute situated outside India is provided by the overseas borrower in favour of the lender.

(5) Foreign currency loans may be extended by Export Import Bank of India, Industrial Development Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India Limited, Small Industries Development Bank of India Limited. or any other institution in India to their constituents in India out of foreign currency borrowings raised by them with the approval of the Central Government for the purpose of onward lending.

6. Other borrowings in foreign exchange with prior approval of

Reserve Bank or Government of India:-

(1) A person resident in India who desires to raise foreign currency loans of the nature or for the purposes specified in the Schedule and who satisfies the eligibility and other conditions specified in that Schedule, may apply to the Reserve Bank for approval to raise such loans.

(2) The Reserve Bank may grant its approval subject to such terms and conditions as it may consider necessary;

Provided that while considering the grant of approval, the Reserve Bank shall take into account the overall limit stipulated by it, in consultation with the Central Government, for availment of such loans by the persons resident in India.

(3) Any other foreign currency loan proposed to be raised by a person resident in India, which falls outside the scope of the Schedule, shall require the prior approval of the Central Government.

(P.R. GOPALA RAO)

Executive Director

Published in the Official Gazette of Government
of India – Extraordinary – Part-II, Section 3,
Sub-Section (i) dated 05.05.2000 – G.S.R.No.386(E)

SCHEDULE

[ See Regulation 6 ]

1. The borrowing in foreign exchange by a person resident in India may be under any of the Schemes set out in this Schedule.

2. The application for the approval of the Reserve Bank under Regulation 6 for borrowing under any of the Schemes shall be made in Form ECB annexed to these Regulations.

3. The borrowing in foreign exchange may be from an overseas bank/export credit agency/supplier of equipment or foreign collaborator, foreign equity holder, NRI, OCB, corporate/institution with a good credit rating from internationally recognised credit rating agency, or from international capital market by way of issue of bonds, floating rate notes or any other debt instrument by whatever name called.

4 The borrower shall not utilise the funds borrowed under any of these Schemes for investment in stock market or in real estate business.

(i) Short term loan scheme

a) Foreign currency credit extended by the overseas supplier of goods to an importer of goods for financing import of goods into India, provided the period of maturity of credit is more than six months but less than three years.

b) Foreign currency loan/credit extended to an importer in India for financing imports into India, by any bank or financial institution outside India, provided the period of maturity of loan/credit is less than three years.

(ii) Borrowing under US dollar Five Million Scheme

Borrowing in foreign exchange upto US$ Five Million or its equivalent by an Indian entity for general corporate purposes at a simple minimum maturity of three years.

(iii) Borrowing under US dollar Ten Million Scheme

Borrowing in foreign exchange not exceeding US$ Ten Million or its equivalent by an Indian entity for the following purposes :

a) Borrowing for Financing of Infrastructure Projects

(i) Borrowing in order to finance equity investment in a subsidiary/joint venture company promoted by the Indian entity for implementing infrastructure projects, provided that the minimum average maturity of loan is three years. In case the loan is to be raised by more than one promoter entity for a single project, the aggregate of loan by all promoters should not exceed US$ 10 million.

(ii) Foreign currency loan raised by an Indian entity for financing infrastructure project, provided that the minimum average maturity of loan is not less than three years.

b) Borrowings by Exporter/Foreign Exchange Earner

Borrowing in foreign exchange by an exporter/foreign exchange earner upto three times of the average amount of his annual foreign exchange earnings during the previous three years subject to a maximum of US$ Ten million or its equivalent, with a minimum average maturity of three years.

c) Long term Borrowings

Borrowing for general corporate purposes at the minimum average maturity of eight years.

(iv) Scheme for raising loans from NRIs on repatriation basis

Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that –

a) the loan is free of interest;

b) the minimum maturity period of the loan is seven years;

c) The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender;

d) The loan is utilised for the borrower’s personal purposes or for carrying on his normal business activity but not for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for re-lending.

Explanation:

‘Close relative’ means relatives as defined in Section 6 of the Companies Act, 1956.

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