No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2005-06/197 · issued 04 Nov 2005 · ~1 min read
Quick answerRBI clarifies that SPVs financing infrastructure qualify as financial institutions for ECB under Approval Route. Banks can now issue guarantees for textile companies' ECB for modernization/expansion, subject to prudential norms.
What changed
RBI clarified that Special Purpose Vehicles (SPVs) set up exclusively to finance infrastructure projects will be treated as financial institutions for ECB under the Approval Route, on a case-by-case basis. Additionally, banks are now permitted to issue guarantees, standby letters of credit, letters of undertaking, or letters of comfort for ECB by textile companies for modernization or expansion of their units, also under the Approval Route.
What it means for you
This expands the pool of eligible ECB borrowers to include infrastructure SPVs, potentially increasing credit flow to infrastructure projects. For textile companies, the ability to obtain bank guarantees for ECB facilitates access to foreign funds for capacity expansion and technology upgrades, supporting the sector post-Multi-Fibre Agreement phase-out. Banks must assess these proposals under the Approval Route with prudential norms.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Review and update internal policies to recognize SPVs financing infrastructure as eligible financial institutions for ECB under Approval Route.
Process textile company ECB guarantee applications under Approval Route, ensuring compliance with prudential norms.
Inform constituents and customers about these ECB policy clarifications and modifications.
Monitor RBI's separate amendment to FEMA regulations for formal changes.
Who it affects
Authorised Dealer banks, Infrastructure SPVs and financial institutions, Textile companies seeking ECB for modernization/expansion
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-19 19:37 IST
Status change: withdrawn09 Jul 2026, 04:04 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the key change for SPVs in this circular?
SPVs set up exclusively to finance infrastructure projects are now treated as financial institutions for ECB, and their proposals will be considered under the Approval Route on a case-by-case basis.
Can banks now issue guarantees for any textile company's ECB?
Yes, but only for ECB by textile companies for modernization or expansion of their units, and such applications must be processed under the Approval Route subject to prudential norms.
📜 Read the original circular — full text as issued by RBI
RBI/2005-06/197
A.P. (DIR Series) Circular No. 15
November 4, 2005
To
All Banks Authorised to deal in Foreign Exchange
Madam/Sir,
External Commercial Borrowings (ECB)
Attention of Authorised Dealer banks is invited
to paragraphs 1(B)(i)(a) and 1(B)(v) in the Annex to A.P.(DIR
Series) Circular No.5 dated August 1, 2005 regarding eligible borrowers
and issuance of guarantee, standby letter of credit, letter of undertaking or
letter of comfort relating to External Commercial Borrowings (ECB), under the
Approval Route.
2. It has been decided to clarify/modify
the ECB policy as indicated below:
i. Currently, ECB proposals of financial institutions dealing exclusively
with infrastructure or export finance are considered by the Reserve Bank on a
case by case basis under the Approval Route. This practice will continue. However,
it is clarified that Special Purpose Vehicles (SPVs) or any other entity, notified
by the Reserve Bank, set up to finance infrastructure companies/projects exclusively
will also be treated as financial institutions and ECB by such entities will be
considered under the Approval Route on a case by case basis.
ii. With a view to facilitating capacity expansion and technological
upgradation in the Indian textile industry after the phasing out of Multi-Fibre
Agreement, banks will be allowed to issue guarantees, standby letters of credit,
letters of undertaking or letters of comfort in respect of ECB by textile companies
for modernization or expansion of their textile units. Such applications will
be considered under the Approval Route subject to prudential norms.
3. The amended ECB policy will come into
force with immediate effect. This is subject to review.
4. Necessary amendments to the Foreign Exchange
Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 dated
May 3, 2000 are being issued separately.
5. Authorised Dealer banks may bring the
contents of this circular to the notice of their constituents and customers.
6. The direction contained in this circular
has been issued under section 10(4) and 11(1) of the Foreign Exchange Management
Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals,
if any, required under any other law.
Yours faithfully,
Vinay Baijal
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2005-06/197 · issued 04 Nov 2005. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=2555&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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