Late Submission Fee (LSF)
Amount involved in reporting (in Rs.) |
Late Submission Fee (LSF) as % of amount involved * |
Maximum amount of LSF applicable |
Up to 10 million |
0.05 percent |
Rs.1 million or 300% of the amount involved, whichever is lower |
More than 10 million |
0.15 percent |
Rs.10 million or 300% of the amount involved, whichever is lower |
* The % of LSF will be doubled every twelve months |
EXTERNAL COMMERCIAL BORROWINGS (ECB)
What is ECB
- External Commercial Borrowings (ECBs) include
- bank loans,
- suppliers' and buyers' credits,
- fixed and floating rate bonds (without convertibility)
- Financial Lease
- borrowings from private sector windows of multilateral Financial Institutions such as IFC, ADB, CDC
- .
- Euro-issues include Euro-convertible bonds and
Sec.6(3) Of FEMA,1999 read with Notification No. FEMA 3/ 2000-RB viz. Foreign Exchange
Management (Borrowing or Lending in Foreign Exchange)Regulations, 2000, dated May 3, 2000
Regulator And Importance of ECB Regulator- CG with the consultation of RBI Importance
- The ECB policy focuses on three aspects:
- Eligibility criteria for accessing external
- The total volume of borrowings to be raised and their maturity
- End use of the funds raised
External Commercial Borrowings
Indian companies are allowed to access funds from abroad in the following Methods:
ECB – New regime
Track – I |
Track – II |
Track – III |
Medium term foreign currency d e n o m i n a t e d E C B w i t h minimum average maturity of 3/5 years |
Long term foreign currency d e n o m i n a t e d E C B w i t h minimum average maturity of 10 years |
I n d i a n R u p e e ( I N R ) d e n o m i n a t e d E C B w i t h minimum average maturity of 3/5 years |
Eligible Borrowers
Track – I |
Track-II |
Track-III |
Companies in Mfg and Software development |
All entities listed under Track-I |
All entities listed under Track-II |
Shipping & Airline Companies |
Companies in Infrastructure Sector |
All NBFCs registered with RBI |
SIDBI (Automatic Route) EXIM Bank(Approval Route) |
REITs and INVITs |
NBFC-MFI, NPOs engaged in MFI activity |
Units in SEZ |
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Cos. engaged in R&D, Training (other than educational Inst.) |
NBFC-IFC, NBFC-AFC |
|
Cos. Supporting Infra and logistic services |
Holding Companies and CIC |
|
Developers of SEZ/NMIZs |
HFC, regulated by the NHB |
|
Companies engaged in the business of Maintenance, Repair and Overhaul and freight forwarding |
Port Trusts |
|
|
EXIM Bank (Approval route) |
|
|
Recognized Lenders
Track – I |
Track-II |
Track-III |
Multilateral financial institutions (such as IFC, ADB, CDC, etc.) / regional FIs and Govt. ownedFis |
All entities listed under Track-I (except OB and Sub of Indian Banks) |
All entities listed under Track-I (except OB and Subsidiaries of Indian Banks) |
International capital markets |
In case of MFIs and NPOs engaged in MFIs, Overseas Organisations and Individuals can lend (subject to the conditions) |
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International banks |
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Export credit agencies |
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Suppliers of equipment |
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Foreign collaborators and Foreign equity holders [other than OCBs] |
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Overseas Long Term Investors |
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Overseas Branches/ Subsidiaries of Indian Banks |
Amount and Maturity Under Automatic Route
All in cost ceiling
Average Maturity Period |
Track-I |
Track-II |
Track-III |
3-5 years |
6 Months LIBOR+ 450 Basis Points |
6 Months LIBOR+ 450 Basis Points |
450 basis points over the prevailing yield of the GOI securities of corresponding maturity |
More than 5 years |
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More than 10 Years |
NA |
Penal Interest - <= 2%
All in cost includes:
- Rate of Interest,
- other fees and expenses in foreign currency
- except commitment fees,
- Prepayment fees,
- Fees payable in Indian Rupees
Parking of ECB Proceeds
- ECB raised abroad meant for Rupee expenditure in India, should be brought immediately for credit to their Rupee accounts with AD Category I banks in Can be parked in unencumbered FDs upto a maximum period of 12 months
- ECB proceeds meant only for foreign currency expenditure can be retained abroad pending
End Use of Proceeds – Not Permitted
Track I to III
- onward lending
- investment in capital market
- Equity investment domestically
Investment in real estate or Acquisition of Land (except for affordable housing projects, SEZs and
Industrial parks/ integrated townships)
Track I and II (except from Direct and Indirect Equity holders & MAM is >= 5 Years)
- Working Capital Purpose
- General Corporate Purpose
- Repayment of Rupee Loans
Issue of Guarantees
- Need to pass Board Resolution with all the details
- Specific requests for issue of Guarantee by individuals need to be explicit
- The Guarantee period should be co-terminus with loan period
Security
- The choice of security to be provided to the lender/supplier is left to the
- However, creation of charge over immovable assets and financial securities in favour of the overseas lender is subject to compliance of specified
Granting of NOC by AD (½)
- ‘No objection’ for Creation of charge on Immovable assets shall be granted only to a resident ECB
- The period of such charge on immovable assets has to be co-terminus with the maturity of the underlying
- Such ‘no objection’ should not be construed as a permission to acquire immovable asset (property) in India, by the overseas lender/ security
- In the event of enforcement / invocation of the charge, the immovable asset (property) will have to be sold only to a person resident in India and the sale proceeds shall be repatriated to liquidate the outstanding
Granting of NOC by AD (2/2)
- No objection’ for pledge of shares shall be granted only to a resident ECB
- The pledge of shares of the borrowing company as well as domestic associate companies held by promoters of the borrowing company to secure the ECB subject to the following conditions:
- The period of such pledge shall be co-terminus with the maturity of the underlying
- In case of invocation of pledge, transfer shall be in accordance with the extant FDI
- A certificate from the Statutory Auditor of the company that the ECB proceeds have been / will be utilized for the permitted end-use/s.
Other Points
- Prepayment of ECB up to USD 500 million may be allowed by AD banks without prior approval of Reserve Bank subject to compliance with the stipulated minimum average maturity period as applicable to the
- The existing ECB may be refinanced by raising a fresh ECB subject to the condition that the fresh ECB is raised at a lower all-in-cost and the outstanding maturity of the original ECB is
Application for Prior Approval
- Applicants are required to submit an application in form ECB through designated AD bank along with necessary
The Chief General Manager-in-Charge, Foreign Exchange Department, Central Office,
ECB Division,
Reserve Bank of India, Mumbai – 400 001
Draw Down/LRN
- For allotment of Loan Registration Number (LRN), borrowers are required to submit Form 83, in duplicate, certified by the CS or CA to the designated AD bank.
- The borrower can draw-down the loan only after obtaining the LRN from DSIM, Reserve
Recurring Compliances
- Borrowers are required to submit ECB-2 Return certified by the designated AD bank on monthly basis so as to reach DSIM, Reserve Bank within seven working days from the close of month to which it
Change of Terms and Other Conditions
- Earlier for cancellation of LRN and change in the end use of ECB Proceeds- approval of DSIM is required
- It has been simplified by delegating power to AD Category-I banks for
- Cancellation of LRN (Automatic & Approval Route)
- Change in the end use of ECB proceeds(Automatic route) Subject to certain
However, change in the end-use of ECBs availed under the approval route will continue to be referred to the Foreign Exchange Department, Central Office, Reserve Bank of India
Conversion of ECB Into Equity- Conditions
- The activity of the company- Automatic Route for FDI
- OR Government approval for foreign equity participation has been obtained by the company, wherever
- The foreign equity holding after such conversion of debt into equity is within the sectoral cap, if any, Pricing of shares is as per the pricing guidelines issued under FEMA, 1999 in the case of listed/ unlisted companies.
Conversion of ECB Into Equity- Reporting
Full Conversion Partial Conversion
- File Form FC-GPR
- Form ECB-2 with in 7 working days
- "ECB wholly converted to equity" -on top of the ECB-2
- Subsequent months Filing is not necessary
- File Form FC-GPR
- Form ECB-2 with in 7 working days
- "ECB Partially converted to equity" -on top of the ECB-2
- Subsequent months Filing is necessary for remaining portion of O/s ECB
Trade Credits
- Suppliers Credit – Where the overseas supplier give credit for certain period
- Buyer’s Credit – Where the overseas supplier facilitates the credit from a foreign bank / financial institution
- Maturity period
Capital Goods - > 1 year and < 5 years from the date of shipment Others - < 1 year or operating cycle, whichever is less
- Amount – USD 20 Million per shipment
- No roll over or extension is permitted
- All in cost ceiling
Maturity Period |
All-in-cost ceilings over 6 months LIBOR* |
Up to one year |
350 basis points |
> 1 year but < 5 years |
|
* for the respective currency of credit or applicable benchmark |
LOANS FROM NRI
Loans from NRI / PIO
- Borrowing in FC by Individual resident Indian in India
- The lender is a close relative (ref Sec 2(77) of Companies Act, 2013)
- The maximum loan amount is USD 250,000 or its equivalent INR
- The loan amount shall be received by CFE/NRE/FCNR funds
- Minimum maturity period of the loan is 1 year
- The loan is free of Interest
- Restriction on end use of Funds
- The borrower shall not engage in Agricultural/ Plantation/ real estate business/ trading in TDR/ does not act as Nidhi or Chit Fund company;
- also the funds shall not be used for investment in capital or otherwise, in any company or partnership firm or proprietorship concern or any entity, whether incorporated or not or for re-lendin
- Borrowing in INR by persons other than Companies in India
- The loan amount shall be received by CFE/NRE/NRO/FCNR funds
- The loan period shall not exceed 3 years
- The Rate of Interest shall not exceed 2% over prevailing bank rate
- The loan amount is not eligible for repatriation (but eligible under USD 1 Million)
- Restriction on end use of Funds Same as in previous slide
Borrowing in INR by Companies in India
- The amount shall be received by way issue of NCDs
- The issue of NCDs is made by public offer
- The loan period shall not be less than 3 years
- The Rate of Interest shall not exceed 3% over prevailing bank rateThe company shall file report to RBI within 30 days of receipt
Additional conditions for repatriation
- The % of investment by NRI shall be within the limits specified under FDI
- The amount has to come by CFE/NRE/FCNR account
Restriction on end use of Funds
- The borrower shall not engage in Agricultural/ Plantation/ real estate business/ trading in TDR/ does not act as Nidhi or Chit Fund company;
also the funds shall not be used for investment in capital or otherwise, in any company or partnership firm or proprietorship concern or any entity, whether incorporated or not or for re-lending