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December 2012

A. P. (DIR Series) Circular No. 48 dated 6th November, 2012

By Gaurang Gandhi, Chartered Accountant
Reading Time 1 mins
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External Commercial Borrowings (ECB) Policy – ECB by Small Industries Development Bank of India (SIDBI)

This circular states that SIDBI has been added as an eligible borrower for availing of ECB upto $ 500 million per financial year for on-lending, for permissible end uses, to the Micro, Small and Medium Enterprises (MSME) sector, subject to the following conditions: –

(a) On-lending must be done directly to the borrowers, either in INR or in foreign currency (FCY): –

(i) Foreign currency risk must be hedged by SIDBI in full in case of on-lending to MSME sector in INR; and

(ii) on-lending in foreign currency can only be to those beneficiaries who have a natural hedge by way of foreign exchange earnings.

(b) ECB, including the outstanding ECB, upto 50% of owned funds, can be availed under the automatic route and ECB beyond 50% of owned funds, can be availed under the approval route.

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