What changed
RBI extended the USD 10 billion ECB scheme to Indian companies in manufacturing, infrastructure, and hotel sectors that have established JVs/WOSs or acquired assets overseas. These firms can now use ECB to repay rupee loans (with average residual maturity of 5+ years) or credit facilities for overseas investments, and for fresh rupee capital expenditure. The ECB amount is capped at 75% of average forex earnings (past 3 years) or 75% of projected forex earnings (next 3 years) from those overseas entities, as certified by specified professionals.
What it means for you
Banks can now facilitate ECB for a broader set of clients—those with overseas investments—for domestic rupee loan repayment and capex, potentially reducing their domestic credit exposure. Lenders must verify forex earnings certification and ensure ECB repayment is from overseas forex inflows, adding compliance layers. This may increase demand for ECB-related advisory and documentation services from banks.
What you must do
- Update internal ECB policy manuals to include eligibility for companies with JVs/WOSs/assets abroad.
- Train staff to verify forex earnings certifications from statutory auditors, CAs, or SEBI-registered merchant bankers.
- Ensure ECB repayment is sourced from overseas forex inflows as per scheme conditions.
- Communicate the expanded scheme to eligible corporate clients in manufacturing, infrastructure, and hotel sectors.
Who it affects
AD Category-I banks, Indian companies in manufacturing, infrastructure, and hotel sectors with overseas JVs/WOSs/assets, Corporate borrowers seeking ECB for rupee loan repayment or capex
What is the maximum ECB amount a company can avail under this scheme?
The ECB amount is limited to 75% of the higher of average forex earnings realized in the past three financial years or projected average forex earnings for the next three years from the overseas JV/WOS/assets, as certified by a qualified professional.
How must the ECB be repaid under this scheme?
The ECB must be repaid out of forex earnings from the overseas joint venture, wholly owned subsidiary, or assets.