What changed
This master circular consolidated all existing instructions on External Commercial Borrowings (ECB) and Trade Credits into a single document, replacing multiple earlier circulars. It was issued with a sunset clause of one year, meaning it would stand withdrawn on July 1, 2009, and be replaced by an updated version.
What it means for you
For banks, this circular provides a single reference point for ECB and trade credit guidelines, simplifying compliance. It clarifies that ECB for investment in the real sector (industrial and especially infrastructure) falls under the automatic route, reducing the need for RBI approval. Banks must ensure all ECB and trade credit transactions adhere to the specified limits on amount, maturity, all-in-cost, and end-use restrictions.
What you must do
- Review and update internal policies to align with the consolidated ECB and trade credit guidelines.
- Ensure all ECB transactions under automatic route meet eligibility, amount, maturity, and end-use criteria.
- Report all ECB and trade credit transactions as per the prescribed forms (ECB, Form 83, ECB-2, Form TC).
- Monitor all-in-cost ceilings and end-use restrictions for both automatic and approval routes.
- Prepare for the sunset clause by planning to adopt the updated master circular after July 1, 2009.
Who it affects
All banks authorised to deal in foreign exchange, Indian companies availing ECB or trade credits, Non-resident lenders providing ECB or trade credits
What is the minimum average maturity for ECB under this circular?
ECB up to USD 20 million has a minimum average maturity of 3 years; ECB above USD 20 million and up to USD 500 million has a minimum average maturity of 5 years.