In September 16, 2003, Overseas Corporate Bodies (OCBs) were derecognised as an eligible 'class of investor' under various routes / schemes available under the extant Foreign Exchange Management Regulations.
2. In terms of Para V, Q.27 of the FAQs appended to A. P. (Dir Series) Circular No.44 dated December 8, 2003, "no person resident in India can borrow from or lend to an OCB in foreign currency or in rupees. Further, where any borrowing from or loan to an OCB, whether in foreign exchange or in Rupees made in accordance with Foreign Exchange Management Regulations as applicable was outstanding on September 16, 2003, such borrowing or loan shall not be renewed on becoming due and no interest thereon shall accrue after it falls due for repayment." Despite this restriction, it is observed that borrowers have availed External Commercial Borrowing from OCBs post derecognition of the OCBs as investor class, on grounds that the OCBs are their foreign equity holders.
3. It is, therefore, reiterated that OCBs not being recognized as investors cannot be recognized lenders.