What changed
Borrowers must now provide a bifurcation of ECB proceeds into foreign currency and rupee expenditure in Form-83 at the time of applying for a Loan Registration Number. The designated AD bank is explicitly required to ensure that rupee-expenditure funds are repatriated to India immediately after drawdown.
What it means for you
This tightens compliance around ECB usage for rupee expenditure, shifting more responsibility onto both borrowers and AD banks. Banks must now actively monitor and enforce repatriation of rupee funds, with non-compliance inviting penal action under FEMA. It adds an upfront disclosure step that may slow down LRN processing if borrowers are unprepared.
What you must do
- Update internal ECB processing checklists to require borrowers to submit Form-83 with full rupee/forex bifurcation at LRN application stage.
- Implement a monitoring mechanism to verify that rupee-expenditure ECB proceeds are repatriated to the borrower's rupee account with your bank immediately after each drawdown.
- Advise corporate clients of this new requirement and the consequences of non-compliance under FEMA.
- Review existing ECB accounts to ensure past drawdowns for rupee expenditure were properly repatriated.
Who it affects
All Category-I Authorised Dealer Banks, Borrowers availing External Commercial Borrowings, Corporate treasuries and finance teams managing ECB compliance
What is the new requirement for ECB borrowers?
When applying for a Loan Registration Number, borrowers must now provide a clear split of how the ECB proceeds will be used for foreign currency expenditure versus rupee expenditure in Form-83.
What is the AD bank's responsibility under this circular?
The designated AD bank must ensure that ECB proceeds meant for rupee expenditure are repatriated to India and credited to the borrower's rupee account immediately after each drawdown.
What happens if a borrower or bank fails to comply?
Any contravention of ECB guidelines will be viewed seriously and may invite penal action under the Foreign Exchange Management Act, 1999.