What changed
This master circular consolidates all existing instructions on External Commercial Borrowings and Trade Credits into a single document, replacing multiple earlier circulars. It includes a sunset clause, meaning it will be withdrawn on July 1, 2010, and replaced by an updated version. The circular does not introduce new policy changes but organizes existing rules under FEMA 1999 and related notifications.
What it means for you
Banks must now refer to this single master circular for all ECB and trade credit guidelines, simplifying compliance. The one-year validity requires banks to stay alert for the updated circular in 2010. All existing norms for eligible borrowers, lenders, maturity, cost ceilings, and end-use remain unchanged, ensuring continuity in foreign exchange borrowing operations.
What you must do
- Review and update internal compliance manuals to reference this master circular for ECB and trade credit transactions.
- Ensure all ECB and trade credit approvals follow the automatic or approval route as specified in the circular.
- Monitor the sunset clause and prepare for the updated master circular expected by July 1, 2010.
- Verify that reporting arrangements for ECB and trade credits are aligned with the forms and procedures outlined in the circular.
Who it affects
All banks authorized to deal in foreign exchange, Indian companies availing ECB or trade credits, Non-resident lenders providing ECB or trade credits, Compliance and treasury departments of banks
What is the sunset clause in this master circular?
The master circular includes a sunset clause of one year, meaning it will stand withdrawn on July 1, 2010, and will be replaced by an updated master circular on the same subject.
Does this circular change any existing ECB rules?
No, this circular consolidates all existing instructions on ECB and trade credits into one place without introducing new policy changes. It organizes rules under FEMA 1999 and related notifications.
What are the key components covered in this circular?
The circular covers ECB under automatic and approval routes, including eligible borrowers, recognized lenders, amount and maturity, all-in-cost ceilings, end-use restrictions, guarantees, security, prepayment, refinancing, and reporting arrangements. It also covers trade credits for imports.