What changed
Previously, ECB was allowed only for import of capital goods, new projects, modernization, and specific service sectors. Now, import of services, technical know-how, and license fees are also permissible as part of import of capital goods under automatic/approval route, subject to conditions like signed agreements, certified invoices, capitalization, and project cost inclusion.
What it means for you
Banks can now process ECB for a broader range of expenses, helping borrowers fund technology transfers and service imports. This reduces pressure on domestic forex resources and supports manufacturing/infrastructure projects. However, AD banks must tighten due diligence to ensure funds are used only for capitalized project costs.
What you must do
- Update internal ECB policy manuals to include import of services, technical know-how, and license fees as permissible end-uses.
- Verify that borrowers provide a signed agreement with the service provider and original certified invoices.
- Ensure borrowers submit declarations that the expenditure will be capitalized and forms part of project cost.
- Conduct enhanced due diligence to confirm the bonafides of each transaction before approving ECB drawdown.
- Train staff on the new conditions and update reporting systems to capture these end-uses correctly.
Who it affects
AD Category-I banks, Companies in manufacturing and infrastructure sectors, Borrowers seeking ECB for technology and service imports
Can ECB be used to pay for software licenses under this circular?
Yes, if the software license qualifies as import of services or technical know-how and is treated as part of import of capital goods for use in manufacturing or infrastructure, with the borrower capitalizing the expenditure as part of project cost.