What changed
The automatic route ECB limit for real sector, industrial sector, and infrastructure sector borrowers was increased from USD 500 million to USD 750 million per financial year. For specified service sector corporates (hotel, hospital, software), the limit was raised from USD 100 million to USD 200 million per financial year, with the condition that proceeds cannot be used for land acquisition. Additionally, all eligible borrowers can now avail of INR-denominated ECBs from foreign equity holders under the automatic or approval route, and infrastructure companies can treat Interest During Construction (IDC) as a permissible end-use if capitalized and part of project cost.
What it means for you
Indian banks can expect increased ECB inflows, especially from infrastructure and service sector clients, which may boost foreign currency liquidity and lending opportunities. The INR-denominated ECB option simplifies hedging for borrowers and reduces currency risk, making foreign borrowing more attractive. Banks must ensure compliance with the unchanged conditions on eligible lenders, all-in-cost, maturity, and reporting.
What you must do
- Update internal ECB policy documents and loan processing systems to reflect the new automatic route limits of USD 750 million for real/infrastructure sector and USD 200 million for service sector corporates.
- Advise clients in infrastructure and service sectors about the enhanced limits and the new INR-denominated ECB option from foreign equity holders.
- Verify that service sector ECB proceeds are not used for land acquisition, and that IDC for infrastructure projects is capitalized and part of project cost.
- Ensure all ECB transactions continue to comply with unchanged norms on eligible lenders, all-in-cost, maturity, prepayment, and reporting.
Who it affects
Authorised Dealer Category I banks, Real sector, industrial sector, and infrastructure sector borrowers, Service sector corporates (hotel, hospital, software), NGOs engaged in micro finance activities, Foreign equity holders providing INR-denominated ECBs
What is the new ECB limit under the automatic route for infrastructure companies?
Infrastructure sector borrowers can now avail ECB up to USD 750 million per financial year under the automatic route, up from the earlier limit of USD 500 million.
Can service sector companies use ECB proceeds to buy land?
No, the circular explicitly states that proceeds from ECBs for service sector corporates (hotel, hospital, software) cannot be used for acquisition of land.
Are INR-denominated ECBs now available to all borrowers?
Yes, all eligible borrowers can avail of ECBs designated in INR from foreign equity holders under the automatic or approval route, as per extant guidelines. NGOs in micro finance can also avail them from overseas organizations and individuals under the automatic route.