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External Commercial Borrowings (ECB) Policy Repayment of Rupee loans and / or fresh Rupee capital expenditure – $ 10 billion Scheme
Presently, Indian companies in the manufacturing, infrastructure sector and hotel sector, which are consistent foreign exchange earners, can avail of ECB for repayment of their outstanding Rupee loan(s) availed of from the domestic banking system and / or for fresh Rupee capital expenditure under the Approval Route.
This circular permits the above (i.e. Indian companies in the manufacturing, infrastructure sector and hotel sector) which have established Joint Venture (JV) / Wholly Owned Subsidiary (WOS) / have acquired assets overseas to avail of ECB under the $ 10 billion scheme for repayment of all term loans having average residual maturity of 5 years and above / credit facilities availed of by Indian companies from domestic banks for investment in JV / WOS overseas, in addition to ‘Capital Expenditure’. Some of the important terms and conditions are: –
1. ECB that can be availed of is the higher of 75% of the average foreign exchange earnings realised during the past three financial years and / or 75% of the average of foreign exchange earnings potential for the next three financial years of the Indian companies from the JV / WOS / assets abroad. These projections have to be certified by the Statutory Auditors / Chartered Accountant / Certified Public Accountant / Category I Merchant Banker registered with SEBI / an Investment Banker outside India registered with the appropriate regulatory authority in the host country.
2. ECB availed of under the scheme has to be repaid out of foreign exchange earnings from the overseas JV / WOS / assets.
3. Past earnings in the form of dividend / repatriated profit / other foreign exchange inflows like royalty, technical know-how, fee, etc. from overseas JV / WOS / assets will be reckoned as foreign exchange earnings for the purpose of $ 10 billion scheme.
