External Commercial Borrowings, Trade Credits and Structured Obligations
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What is the definition of External Commercial Borrowings (ECBs) under RBI guidelines?
ECBs are commercial loans raised by eligible resident entities from recognised non-resident lenders, including bank loans, buyers' credit, suppliers' credit, securitised instruments, and bonds/debentures with a minimum average maturity as prescribed by RBI.
What is the maximum amount of ECB that can be raised under the automatic route per financial year?
USD 750 million or equivalent per financial year.
Which regulatory framework governs ECBs in India?
ECBs are regulated under the Foreign Exchange Management Act (FEMA), 1999 and RBI's Master Direction on External Commercial Borrowings, Trade Credits, and Structured Obligations issued under FEMA.
What does 'all-in-cost' of ECB include?
Rate of interest, fees, expenses, and charges paid to the lender.
What are the two tracks under which ECBs can be raised?
ECBs can be raised under Track I (medium-term foreign currency denominated ECBs with a minimum average maturity of 3-5 years) and Track III (Rupee-denominated ECBs/Masala Bonds with a minimum average maturity of 3-5 years), with Track II merged into Track I.
Which body issues the master directions on ECB and Trade Credits in India?
Reserve Bank of India (RBI) under FEMA 1999.
What is the all-in-cost ceiling for ECBs?
The all-in-cost ceiling for ECBs is benchmarked to the overnight Alternative Reference Rate (ARR) plus a spread; for foreign currency ECBs the ceiling is ARR plus 500 basis points per annum, covering all-in-cost including arranging fees, upfront fees, and other charges.
What is the minimum average maturity for Trade Credit up to USD 20 million?
One year from the date of shipment.
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