Current · Source: Reserve Bank of India · RBI/2011-12/200 · issued 23 Sep 2011 · ~2 min read
Quick answerRBI now allows infrastructure companies to use short-term bridge finance (including buyers'/suppliers' credit) for importing capital goods, under approval route. This bridge finance must later be replaced with a long-term ECB that meets all standard norms. AD banks must monitor end-use and verify imports via Bill of Entry.
The rule, in the simplest words
Infrastructure companies can borrow short-term money (bridge finance) from foreign lenders to buy big machines (capital goods) from other countries, but they must get RBI's special permission first.
The short-term loan must be paid off later with a long-term loan (ECB) that follows all the normal rules, and RBI must say 'okay' before switching to that long-term loan.
Banks in India cannot promise to pay back the loan if the company fails (no guarantees), and they must check that the machines were actually imported by looking at the Bill of Entry (customs document).
All other regular ECB rules (like who can borrow, who can lend, interest cost, loan time, and reporting) still apply and must be followed.
How it plays out — a real example
A forex & trade-finance officer in Mumbai helps an infrastructure company that wants to import a big crane. The officer arranges a short-term bridge loan from a foreign bank, but first gets RBI's special approval. Later, when the company replaces that loan with a long-term ECB, the officer again gets RBI's okay and checks the Bill of Entry to confirm the crane arrived, all while making sure no bank guarantee is given.
What changed
RBI has reviewed the ECB policy for infrastructure sector and now permits Indian infrastructure companies to avail short-term credit (bridge finance) for importing capital goods, under the approval route. The bridge finance must be replaced with a long-term ECB that complies with all extant ECB norms, and prior RBI approval is required for that replacement.
What it means for you
Banks can now facilitate short-term bridge finance for infrastructure clients importing capital goods, but must ensure the bridge loan is eventually replaced by a compliant long-term ECB. Banks cannot provide any guarantees for these transactions and must strictly monitor end-use and verify import documentation. This gives infrastructure firms more flexibility in funding imports while maintaining ECB discipline.
What you must do
Advise infrastructure clients that they can avail short-term bridge finance for capital goods imports under approval route, subject to replacement with long-term ECB.
Ensure prior RBI approval is obtained before replacing bridge finance with long-term ECB.
Monitor end-use of funds and verify import of capital goods via Bill of Entry; do not provide any guarantees.
Comply with all other ECB norms (eligible borrower, lender, all-in-cost, average maturity, reporting) unchanged.
Who it affects
Authorised Dealer Category I banks, Infrastructure sector companies importing capital goods, Borrowers and lenders involved in ECB transactions
❓ Common questions
What is bridge finance in this context?
It is short-term credit (including buyers'/suppliers' credit) availed by infrastructure companies to import capital goods, which must later be replaced by a long-term ECB.
Can banks provide guarantees for such bridge finance?
No, banks in India are not permitted to provide any form of guarantees for these transactions.
What documentation is needed to evidence import?
The designated AD Category I bank must verify the Bill of Entry to evidence the import of capital goods.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/200
A.P. (DIR Series) Circular No. 26
September 23, 2011
To
All Authorised Dealer Category I Banks
Madam / Sir,
External Commercial Borrowings (ECB) – Bridge Finance for
Infrastructure Sector
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to the Foreign Exchange Management (Borrowing or lending in foreign exchange) Regulations, 2000, notified vide Notification No. FEMA 3/2000-RB dated May 3, 2000 , amended from time to time and the A.P. (DIR Series) Circular No. 5 dated August 1, 2005, amended from time to time relating to the External Commercial Borrowings (ECB).
2. Considering the specific needs of the infrastructure sector, the existing ECB policy has been reviewed in consultation with the Government of India and it has been decided to allow Indian companies which are in the infrastructure sector, where “infrastructure” is as defined under the extant guidelines on External Commercial Borrowings (ECB), to import capital goods by availing of short term credit (including buyers’ / suppliers’ credit) in the nature of 'bridge finance', under the approval route, subject to the following conditions:-
(i) the bridge finance shall be replaced with a long term ECB;
(ii) the long term ECB shall comply with all the extant ECB norms; and
(iii) prior approval shall be sought from the Reserve Bank for replacing the bridge finance with a long term ECB.
3. The designated AD - Category I bank shall monitor the end-use of funds and banks in India will not be permitted to provide any form of guarantees. The designated AD - Category I bank shall evidence the import of capital goods by verifying the Bill of Entry. All other conditions of ECB, such as eligible borrower, recognized lender, all- in-cost, average maturity, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged and should be complied with.
4. The amended ECB policy will come into force with immediate effect and is subject to review.
5. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.
6. The directions contained in this circular has been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/200 · issued 23 Sep 2011. The plain-English explanation above is BankPulse’s own independent summary.
Advise infrastructure clients that they can avail short-term bridge finance for capital goods imports under approval route, subject to replacement with long-term ECB.
Monitor end-use of funds and verify import of capital goods via Bill of Entry; do not provide any guarantees.
📜 Compliance
Ensure prior RBI approval is obtained before replacing bridge finance with long-term ECB.
Comply with all other ECB norms (eligible borrower, lender, all-in-cost, average maturity, reporting) unchanged.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (Authorised Dealer Category I banks, Infrastructure sector companies importing capital goods, Borrowers and lenders involved in ECB transactions), your first concrete step on “ECB Bridge Finance for Infrastructure Sector” is: “Advise infrastructure clients that they can avail short-term bridge finance for capital goods imports under approval route, subject to replacement with long-term ECB.” (RBI issued this 23 Sep 2011).
Circular: RBI/2011-12/200 -- ECB Bridge Finance for Infrastructure Sector
Issued: 23 Sep 2011
Action required: Advise infrastructure clients that they can avail short-term bridge finance for capital goods imports under approval route, subject to replacement with long-term ECB.
Action required: Ensure prior RBI approval is obtained before replacing bridge finance with long-term ECB.
Action required: Monitor end-use of funds and verify import of capital goods via Bill of Entry; do not provide any guarantees.
Action required: Comply with all other ECB norms (eligible borrower, lender, all-in-cost, average maturity, reporting) unchanged.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
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
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 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=6732&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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