ECB from Foreign Equity Holder for General Corporate Purpose
Current · Source: Reserve Bank of India · RBI/2013-14/221 · issued 04 Sep 2013 · ~2 min read
Quick answerRBI now permits eligible borrowers to raise ECB from their foreign equity holder (minimum 25% paid-up equity directly held by lender) under approval route, with minimum average maturity of 7 years, for general corporate purposes. No prepayment allowed before maturity.
The rule, in the simplest words
Eligible borrowers can raise External Commercial Borrowings (ECB) from their foreign equity holder for general corporate purposes under the approval route.
The foreign equity holder must directly hold at least 25% paid-up equity of the borrower.
The loan must have a minimum average maturity of 7 years, with no prepayment allowed before maturity.
Repayment of principal starts only after completion of the minimum average maturity of 7 years.
How it plays out — a real example
A forex & trade-finance officer in Indore, working with an Authorised Dealer Category-I bank, helps a client apply for an ECB from their foreign equity holder to fund general corporate purposes. The officer verifies that the foreign equity holder directly holds at least 25% paid-up equity and ensures the loan has a minimum average maturity of 7 years, with repayment of principal starting only after 7 years. The officer advises the client to apply under the approval route, as the automatic route is not available for this relaxation.
What changed
Previously, ECB could not be used for general corporate purpose. Now, under the approval route, eligible borrowers can raise ECB from their foreign equity holder for general corporate purposes, provided the lender holds at least 25% paid-up equity directly and the loan has a minimum average maturity of 7 years. Repayment of principal starts only after completion of the minimum average maturity of 7 years, and no prepayment is allowed before maturity.
What it means for you
Banks and lenders can now facilitate ECB for general corporate purposes from foreign equity holders, but only under the approval route with strict conditions. This opens a new funding avenue for eligible borrowers, but the 7-year lock-in and no-prepayment clause increase risk and reduce flexibility. Banks must ensure compliance with the 25% equity holding and end-use restrictions.
What you must do
Verify that the borrower's foreign equity holder directly holds at least 25% paid-up equity before processing ECB applications.
Ensure ECB proceeds are not used for any purpose prohibited under extant ECB guidelines, including on-lending to group companies or step-down subsidiaries.
Confirm that the ECB agreement mandates repayment of principal commencement only after completion of the minimum average maturity of 7 years and prohibits prepayment before maturity.
Advise customers to apply under the approval route for such ECBs, as automatic route is not available for this relaxation.
Update internal ECB policy and training materials to reflect this new approval-route facility for general corporate purpose.
Who it affects
Authorised Dealer Category-I banks, Eligible borrowers seeking ECB for general corporate purpose, Foreign equity holders of Indian companies
❓ Common questions
Can any borrower avail ECB for general corporate purpose under this circular?
No, only eligible borrowers who have a foreign equity holder directly holding at least 25% paid-up equity can avail, and only under the approval route.
What is the minimum maturity and repayment condition for such ECBs?
The minimum average maturity is 7 years. Repayment of principal can start only after completion of this minimum average maturity period, and no prepayment is allowed before maturity.
Can the ECB proceeds be on-lent to group companies or step-down subsidiaries?
No, such ECBs cannot be used for any purpose not permitted under extant ECB guidelines, including on-lending to group companies or step-down subsidiaries in India.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/221
A.P. (DIR Series) Circular No.31
September 04, 2013
To
All Authorised Dealer Category-I Banks
Madam / Sir,
External Commercial Borrowings (ECB) from the foreign equity holder
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to the A.P. (DIR Series) Circular No. 5 dated August 1, 2005 , as amended from time to time, relating to the External Commercial Borrowings (ECB).
2. As per the extant ECB policy, borrowings in the form of ECB cannot be utilized for general corporate purpose.
3 On a review, it has been decided to permit eligible borrowers to avail of ECB under the approval route from their foreign equity holder company with minimum average maturity of 7 years for general corporate purposes subject to the following conditions:
Minimum paid-up equity of 25 per cent should be held directly by the lender;
Such ECBs would not be used for any purpose not permitted under extant the ECB guidelines (including on-lending to their group companies / step-down subsidiaries in India); and
Repayment of the principal shall commence only after completion of minimum average maturity of 7 years. No prepayment will be allowed before maturity.
4. The above modifications to the ECB guidelines will come into force with immediate effect. All other aspects of extant ECB guidelines shall remain unchanged.
5 A.D. Category-I banks may bring the contents of this circular to the notice of their constituents and customers.
6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/221 · issued 04 Sep 2013. The plain-English explanation above is BankPulse’s own independent summary.
Verify that the borrower's foreign equity holder directly holds at least 25% paid-up equity before processing ECB applications.
📜 Compliance
Ensure ECB proceeds are not used for any purpose prohibited under extant ECB guidelines, including on-lending to group companies or step-down subsidiaries.
Confirm that the ECB agreement mandates repayment of principal commencement only after completion of the minimum average maturity of 7 years and prohibits prepayment before maturity.
Advise customers to apply under the approval route for such ECBs, as automatic route is not available for this relaxation.
Update internal ECB policy and training materials to reflect this new approval-route facility for general corporate purpose.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (Authorised Dealer Category-I banks, Eligible borrowers seeking ECB for general corporate purpose, Foreign equity holders of Indian companies), your first concrete step on “ECB from Foreign Equity Holder for General Corporate Purpose” is: “Verify that the borrower's foreign equity holder directly holds at least 25% paid-up equity before processing ECB applications.” (RBI issued this 04 Sep 2013).
Circular: RBI/2013-14/221 -- ECB from Foreign Equity Holder for General Corporate Purpose
Issued: 04 Sep 2013
Action required: Verify that the borrower's foreign equity holder directly holds at least 25% paid-up equity before processing ECB applications.
Action required: Ensure ECB proceeds are not used for any purpose prohibited under extant ECB guidelines, including on-lending to group companies or step-down subsidiaries.
Action required: Confirm that the ECB agreement mandates repayment of principal commencement only after completion of the minimum average maturity of 7 years and prohibits prepayment before maturity.
Action required: Advise customers to apply under the approval route for such ECBs, as automatic route is not available for this relaxation.
Action required: Update internal ECB policy and training materials to reflect this new approval-route facility for general corporate purpose.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8370&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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