External commercial borrowing

What is “External Commercial Borrowings (ECB) “External Commercial Borrowings (ECB)” means borrowing by an eligible resident entity from outside India in accordance with framework decided by the Reserve Bank of India in consultation with the Government of India: Eligible entities may raise External Commercial Borrowings (ECB)from outside India in accordance with the provisions. ♦ Currency of borrowing ECB can be raised in any freely convertible foreign currency as well as in Indian Rupees or any other currency as specified by the Reserve Bank of India in consultation with the Government of India. ♦ Eligibility of borrowers This has been expanded to include all entities eligible to receive FDI. Additionally, Port Trusts, Units in SEZ, SIDBI, EXIM Bank, registered entities engaged in micro-finance activities, viz., registered not for profit companies, registered societies/trusts/ cooperatives and non-government organizations/Start-ups can also borrow under this framework. Further, Reserve Bank, in consultation with the Government of India may specify any other entity/sector eligible to raise ECBs or amend the existing eligibility norms. ♦ Eligible Lenders: The lender should be resident of FATF or IOSCO compliant country as defined in the ECB policy, including on transfer of ECBs. However, Multilateral and Regional Financial Institutions where India is a member country will also be considered as recognized lenders. ♦ Foreign Equity Holder: It means (a) direct foreign equity h...

Table of Contents • • • • Routes for ECB ECB can be availed by either automatic route or by approval route. Under the automatic route, the government has permitted some eligibility norms with respect to industry, amounts, end-use, etc. If a company passes all the prescribed norms, it can raise money without any prior approval. For specific pre-specified sectors, the borrowers have to take explicit permission from the government/The Reserve bank of India (RBI) before borrowing through ECB. RBI has issued formal guidelines and circulars specifying these borrowing rules. Let us look at the advantages and limitations of ECBs to understand the topic in further detail. Benefits of ECB • The cost of funds is usually cheaper from external sources if borrowed from economies with a lower interest rate. Indian companies can usually borrow at lower rates from the U.S. and the Eurozone as interest rates are lower there compared to the home country, India. • Availability of a larger market can help companies satisfy larger requirements from global players better than what can be achieved domestically. • ECB is just a form of a loan and may not be of an equity nature or convertible to equity. Hence, it does not dilute the stake in the company and can be done without giving away control because debtors do not enjoy voting rights. • The borrower can diversify the investor base. • It provides access to international markets for the borrowers and gives good exposure to opportunities globally...

The Reserve Bank of India has started issuing Master Directions on all regulatory matters beginning January 2016. The Master Directions consolidate instructions on rules and regulations framed by the Reserve Bank under various Acts including banking issues and foreign exchange transactions. The process of issuing Master Directions involves issuing one Master Direction for each subject matter covering all instructions on that subject. Any change in the rules, regulation or policy is communicated during the year by way of circulars/press releases. The Master Directions will be updated suitably and simultaneously whenever there is a change in the rules/regulations or there is a change in the policy. All the changes will get reflected in the Master Directions available on the RBI website along with the dates on which changes are made. Explanations of rules and regulations will be issued by way of Frequently Asked Questions (FAQs) after issue of the Master Directions in easy to understand language wherever necessary. The existing set of Banker and Debt Manager to Government Jul 03, 2018 256 kb Jul 01, 2016 669 kb Co-operative Banking May 12, 2016 270 kb Commercial Banking May 29, 2019 529 kb Jul 01, 2016 232 kb Jun 23, 2016 447 kb May 26, 2016 136 kb May 12, 2016 72 kb Apr 21, 2016 65 kb 54 kb Mar 03, 2016 150 kb 228 kb Nov 19, 2015 116 kb Oct 22, 2015 259 kb Financial Inclusion and Development Jun 27, 2019 326 kb Oct 17, 2018 279 kb 212 kb Jul 24, 2017 408 kb Jul 05, 2017 136 ...

External commercial borrowing is a process companies within India can use to access foreign sources of funding. It is necessary to follow some specific protocols in the application process, and companies may only use the money for certain specified purposes. Companies can raise their own funds, or turn to an agent to assist them with locating financial opportunities. The government regulates external commercial borrowing in the interest of maintaining economic health and Foreign funds can be provided in the form of loans, credit, bonds, and other financial instruments. A company in need of external commercial borrowing may need a large amount of money or may have an interest in expanding operations. It is not legal to use the money in speculative activities like investing in the stock market, and the company must be able to show how it will apply the funds when it seeks financial assistance. Companies with an interest in external commercial borrowing can meet with financial advisers to get information about the available opportunities and how to apply. In a growth economy, it can be easy to locate foreign investors with an interest in Indian companies, but it is important to compare sources of funding. A company may be able to negotiate a better deal if it investigates its options thoroughly and is willing to bargain. Financial institutions can provide assistance with locating funds that may not be available through other sources. The rate of external commercial borrowing ...

Wall Street in May restarted its commercial-real estate debt machine after activity Goldman Sachs analysts pegged the average coupon on new loans from Wall Street to finance hotels, shopping centers and other commercial property types at slightly more than 7% (see chart), roughly double the pandemic lows of closer to 3.5%. Property loans provided by Wall Street are costing a lot more than in 2021 Trepp, Goldman Sachs Global Investment Research Known as the “commercial mortgage-backed securities” (CMBS) market, the debt source isn’t as big a supplier of loans to landlords as banks or insurance companies, but it matters because it’s often the cheapest mode of financing available. That’s partially because the loans aren’t retained by the originator, but instead bundled into bonds that are sold to investors, who shoulder the risks of any borrower defaults. CMBS is priced at a spread, or premium, above the risk-free 10-year Treasury rate 3.741% , which was at 3.75% on Friday. Wall Street packaged up some $5 billion in new property loans into bond deals in May, after about $8 billion in deals for the first four months of 2023, according to Goldman credit researchers. “That said, the terms of credit remain squarely in favor of lenders, with a steep decline in leverage (i.e., lower LTVs) and a marked reduction in the share of loans backed by office properties,” Goldman’s credit team led by Lotfi Karoui, wrote in a weekly client note. The worry is that credit has been harder for la...

ME • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • External Commercial Borrowings, also known as ECB, in short, are loans which are borrowed from foreign banks and institutions. ECB compliance is required for all institutions that borrow these forms of loans. As the name indicates, External Commercial Borrowings are borrowings that are made from foreign institutions and banks.ECB can only used for a specific purpose. Companies and public Sector undertakings (PSUs) prefer using ECBs as there is a low rate of interest payable on ECBs. ECB Compliance- An Overview External Commercial Borrowings is also known as ECB. External Commercial Borrowings are commercial loans which are provided by foreign institutional investors. These loans carry a lower rate of interest in comparison to the interest rates which are offered by commercial banks in India. Therefore companies and Public Sector Undertakings (PSU) prefer opting for ECB. For corporates to utilize these loans they have to follow the rules related to ECB Compliance. As ECBs can be used only for specific commer...

The loan given by non-resident lenders to Indian borrowers who are qualified for the ECB is known as External Commercial Borrowing and can be made in INR or foreign currency. The financing is being used for business purposes. The ECB receives funding from international sources or any reputable organization outside of India. The criteria for obtaining the ECB have been streamlined, and it is now more common because it is generally available on simple terms. Table of Content • Concept of External Commercial Borrowings • Benefits of External Commercial Borrowing • Various Guidelines regarding External Commercial Borrowing • Non- Availability of ECB • Procedure to obtain Loan Registration Number under ECB • Procedure for raising the ECB • Limitation and Leverage • The ECB’s Reporting • Takeaway Concept of External Commercial Borrowings External Commercial Borrowings are commercial loans made by qualifying resident companies to recognize non-resident businesses that must meet certain requirements such as the Minimum Average Maturity Period (MAMP), approved and prohibited end-uses, maximum All-In-Cost (AIC), and so on. • Obtain Commercial Loans • Recognized Mortgage Lenders (Non-Resident) • Qualified Borrowers (Resident) • For allowed end use and within established parameters (MAMP, AIC) The Foreign Exchange Management Act, 1999, and the RBI Master Direction- External Commercial Borrowings, Trade Credits, and Structured Obligations control ECBs (FEMA). Benefits of External Comme...

In simple terms, External Commercial Borrowings (ECB) means commercial borrowings availed (in the form of bank loans, trade credits, securitized instruments) from external source (from abroad) with a minimum average maturity of three years. The borrowings under ECB takes place in two channels namely automatic route and approved routes. The eligible borrowers like Corporate Importers, Financial Institutions, Housing Finance Companies, Power finance and trading companies, NGOs and SEZs are allowed to access funds through ECB. The borrowings for infrastructure sector and Industrial sector are generally come under automatic route. The rest of the borrowings under ECS are subjected to RBI approval. The Reserve bank approves ECS proposals from borrowing company based on utilization of funds, all in cost ceiling and recognized lenders (such as International Banks, IFC,ADB, CDC, International capital markets, export credit agencies, suppliers of equipment etc.) on a case to case basis. Purpose of ECB borrowings: The borrowing for import of capital goods (as classified by DGFT under Foreign Trade Policy), new projects, modernization/expansion plans of existing manufacturing units including SME, Infrastructure sectors and specified service sectors like hotel, hospital, software and other specified sectors are allowed access for funds through ECB. Individuals, trusts, non-profit making organizations are not eligible to borrow under ECB. Restrictions in using ECB funds: There are seve...