What changed
RBI expanded ECB eligibility to manufacturing and infrastructure firms for repaying rupee loans taken for capital expenditure or for fresh rupee capex, under approval route. Earlier, only infrastructure sector with natural hedge was allowed. The overall cap is USD 10 billion, and individual company limit is 50% of average annual export earnings over past three years.
What it means for you
Banks can expect increased ECB applications from manufacturing clients, reducing their domestic loan exposure. Lenders must ensure end-use monitoring and cannot provide guarantees. The move may ease pressure on domestic credit for capex, but banks need to verify forex earnings and loan utilization certificates carefully.
What you must do
- Advise eligible manufacturing and infrastructure clients about this ECB window for rupee loan repayment or fresh capex.
- Ensure applications include statutory auditor certification on forex earnings and capital expenditure usage.
- Monitor end-use of ECB funds and confirm no domestic forex market access for repayment.
- Do not issue any guarantees for such ECBs; ensure compliance with all other ECB conditions.
Who it affects
AD Category-I banks, Manufacturing companies with consistent forex earnings, Infrastructure companies, Domestic lending banks with outstanding rupee loans
What is the maximum ECB amount a company can avail under this circular?
The overall ceiling is USD 10 billion. An individual company can borrow up to 50% of its average annual export earnings over the past three financial years.
Can banks provide guarantees for these ECBs?
No. Banks in India are not permitted to provide any form of guarantee for such ECBs.
How should companies apply for this ECB facility?
Companies must submit Form ECB through their designated AD Category-I bank, with statutory auditor certification on forex earnings and capital expenditure, and certification from the domestic lending bank on outstanding rupee loans.