Home › Circulars › RBI/2006-2007/409

ECB: Integrated Township Exemption Removed, Cost Ceilings Tightened

Current · Source: Reserve Bank of India · RBI/2006-2007/409 · issued 21 May 2007 · ~1 min read
Quick answerRBI has withdrawn the integrated township exemption from real estate end-use for ECB, and lowered all-in-cost ceilings by 50-100 bps over LIBOR, effective immediately.
The rule, in the simplest words
How it plays out — a real example

Rajesh, a compliance officer at a large AD bank, reviews a new ECB application from a developer for a township project. He immediately flags it as non-compliant because the integrated township exemption is now withdrawn, and advises the client to restructure the funding.

What changed

The exemption allowing ECB proceeds for development of integrated township has been removed, so no real estate use is permitted. All-in-cost ceilings were reduced: for 3-5 year maturity from 200 to 150 bps over LIBOR, and for over 5 years from 350 to 250 bps over LIBOR.

What it means for you

Banks must ensure ECB loans are not used for any real estate, including integrated townships. Tighter cost caps mean borrowers will face lower maximum interest rates, potentially reducing ECB attractiveness for longer-tenor loans.

What you must do

Who it affects

AD Category-I banks processing ECB applications, Corporate borrowers seeking ECB for real estate or integrated township projects, Compliance teams managing FEMA regulations

❓ Common questions

Can ECB proceeds now be used for any real estate project?

No. The circular removes the earlier exemption for integrated township, so ECB proceeds cannot be used for any real estate activity.

What are the new all-in-cost ceilings for ECB?

For loans with average maturity of 3-5 years, the ceiling is 150 bps over LIBOR; for over 5 years, it is 250 bps over LIBOR.

Do these changes apply to existing ECB approvals?

The circular states the changes apply with immediate effect to both automatic and approval routes, but does not specify retrospective application to existing approvals.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications Withdrawn with effect from November 16, 2021, February 18, 2022, May 02, 2022, May 13, 2022, May 21, 2024, July 12, 2024 & October 01, 2024 ( 548 kb ) External Commercial Borrowings (ECB) – End-use and All-in-cost ceilings - Revised RBI/2006-2007/409 A. P. (DIR Series) Circular No. 60 May 21, 2007 To All Category – I Authorised Dealer Banks Madam / Sir, External Commercial Borrowings (ECB) – End-use and All-in-cost ceilings - Revised Attention of Authorised Dealers Category - I (AD Category – I) banks is invited to the A. P. (DIR Series) Circular No.5 dated August 1, 2005 on External Commercial Borrowings (ECB). A review of the ECB guidelines has been undertaken keeping in view the current macroeconomic situation and the experience gained so far by the Reserve Bank in administering the ECB policy. 2. Based on the review, the ECB policy is modified as indicated below: 2. (a) End-use - As per the extant ECB policy, utilisation of ECB proceeds is not permitted in real estate. The term 'real estate' excludes development of integrated township as defined by Press Note 3 (2002 Series) dated January 4, 2002. It has now been decided to withdraw the exemption accorded to the 'development of integrated township' as a permissible end-use of ECB. Accordingly, utilisation of ECB proceeds is not permissible in real estate, without any exemption. 2. (b) All-in-cost ceilings - With the sovereign credit ratings of India enhanced to investment grade, the all-in-cost ceilings for ECB are modified as follows: Average Maturity Period All-in-Cost ceilings over 6 Months LIBOR* Existing Revised Three years and up to five years 200 basis points 150 basis points More than five years 350 basis points 250 basis points * for the respective currency of borrowing or applicable benchmark. 3. The above changes will apply to ECB both under the automatic route as well as approval route with immediate effect and is subject to review. 4. Necessary amendments to Notification No. FEMA 3/2000-RB dated 3rd May 2000 [Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000] are being issued separately. 5. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 6. The directions contained in this circular have 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. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2006-2007/409 · issued 21 May 2007. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Verify all new ECB applications under automatic and approval routes against revised all-in-cost ceilings.
📜 Compliance
  • Update internal ECB compliance checklists to exclude integrated township as a permissible end-use.
  • Advise corporate clients that ECB for real estate is now fully prohibited, with no exemptions.
  • Monitor existing ECB sanctions to ensure no disbursements are made for integrated township projects.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks processing ECB applications, Corporate borrowers seeking ECB for real estate or integrated township projects, Compliance teams managing FEMA regulations), your first concrete step on “ECB: Integrated Township Exemption Removed, Cost Ceilings Tightened” is: “Update internal ECB compliance checklists to exclude integrated township as a permissible end-use.” (RBI issued this 21 May 2007).

  1. Circular: RBI/2006-2007/409 -- ECB: Integrated Township Exemption Removed, Cost Ceilings Tightened
  2. Issued: 21 May 2007
  3. Action required: Update internal ECB compliance checklists to exclude integrated township as a permissible end-use.
  4. Action required: Verify all new ECB applications under automatic and approval routes against revised all-in-cost ceilings.
  5. Action required: Advise corporate clients that ECB for real estate is now fully prohibited, with no exemptions.
  6. Action required: Monitor existing ECB sanctions to ensure no disbursements are made for integrated township projects.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

💬 Banker Discussion

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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=3544&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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