External Commercial Borrowings (ECBs) include bank loans, suppliers' and buyers'
credits, fixed and floating rate bonds (without convertibility) and borrowings from
private sector windows of multilateral Financial Institutions such as International
Finance Corporation. Euro-issues include Euro-convertible bonds and GDRs.
In India, External Commercial Borrowings are being permitted by the Government for providing an additional source of funds toIndian corporates and PSUs for financing expansion of existing capacity and as well as for fresh investment, to augment theresources available domestically. ECBs can be used for any purpose (rupee-related expenditure as well as imports) except for investment in stock market and speculation in real estate.
External Commercial Borrowings (ECB) are defined to include
commercial bank loans,
securitised instruments such as floating rate notes, fixed rate bonds etc.,
credit from official export credit agencies,
commercial borrowings from the private sector window of multilateral financial institutions such as IFC, ADB, AFIC, CDC etc.
Investment by Foreign Institutional Investors (FIIs) in dedicated debt funds
Applicants are free to raise ECB from any internationally recognised source like banks, export credit agencies, suppliers of equipment, foreign collaborations, foreign equity - holders, international capital markets etc.
The department of Economic
Affairs, Ministry of Finance, Government of India with support of Reserve Bank of India, monitors and regulates Indian firms
access to global capital markets. From time to time, they announce guidelines on policies
and procedures for ECB and Euro-issues.
The important aspect of ECB policy is to provide flexibility in borrowings by Indian corporates, at the same time maintaining prudent limits for total external borrowings. The guiding principles for ECB Policy are to keep maturities long, costs low, and encourage infrastructure and export sector financing which are crucial for overall growth of the economy.
The ECB policy focuses on three aspects:
- Eligibility criteria for accessing external markets.
- The total volume of borrowings to be raised and their
- End use of the funds raised.
Detailed ECB guidelines were announced in July 1999... Click here
Since July 1999, various modifications & relaxations had been made in the Guidelines by the the Indian Government and Reserve Bank of India. In this section you get access to all the changes made in the ECB Guidelines (1999-2010) ...Click here