Current · Source: Reserve Bank of India · RBI/2013-14/302 · issued 30 Sep 2013 · ~1 min read
Quick answerRBI clarifies that ECB proceeds can be used for all stages of share acquisition under the government's PSU disinvestment programme, including multiple rounds, not just the first stage and mandatory second offer.
The rule, in the simplest words
Banks can use ECB proceeds for all stages of PSU share acquisition, not just the first stage and mandatory second offer.
ECB is now available for multiple rounds of PSU share acquisition.
Banks must assess compliance with overall ECB guidelines and FEMA provisions for ECB applications under this facility.
How it plays out — a real example
A forex & trade-finance officer in Indore, Mr. Kumar, helps a corporate borrower, ABC Ltd, with their ECB proposal for a PSU share acquisition. Mr. Kumar ensures that the borrower understands the new rules and complies with ECB guidelines and FEMA provisions, making the process smoother for both parties.
What changed
Earlier, ECB was permitted only for the first stage acquisition and the mandatory second stage offer to the public in PSU disinvestment. This circular extends the facility to all subsequent stages of acquisition, making ECB available for multiple rounds of disinvestment.
What it means for you
Banks can now process ECB proposals for any round of PSU share disinvestment, providing more flexibility for borrowers. This may increase demand for ECB as a funding source for PSU stake purchases, requiring banks to assess compliance with overall ECB guidelines.
What you must do
Update internal ECB policy to reflect that proceeds can be used for all stages of PSU disinvestment.
Advise customers that ECB is now available for multiple rounds of PSU share acquisition.
Ensure all ECB applications under this facility comply with extant ECB guidelines and FEMA provisions.
Monitor end-use declarations to confirm funds are used only for permitted disinvestment stages.
Who it affects
AD Category-I banks handling ECB transactions, Corporate borrowers investing in PSU disinvestment, Government entities managing PSU disinvestment programmes
❓ Common questions
Does this circular allow ECB for all rounds of PSU disinvestment?
Yes, RBI clarifies that ECB is permitted for all subsequent stages of share acquisition under the government's PSU disinvestment programme, not just the first stage and mandatory second offer.
What should banks do to implement this change?
Banks should update their internal policies, inform customers about the expanded scope, and ensure all ECB applications comply with existing FEMA and ECB guidelines.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/302
A.P. (DIR Series) Circular No. 57
September 30, 2013
To
All Authorised Dealer Category – I Banks
Madam / Sir
External Commercial Borrowings (ECB) Policy – ECB proceeds for acquisition of shares under the Government’s disinvestment programme of PSUs - Clarification
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the A.P. (DIR Series) Circular No. 5 dated August 1, 2005 , relating to External Commercial Borrowings (ECB) as amended from time to time in terms of which ECB proceeds is permitted to be used in the first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Government’s disinvestment programme of the public sector undertakings (PSUs) shares.
2. It is clarified that ECB is allowed for all subsequent stages of acquisition of shares in the disinvestment process under the Government’s disinvestment programme of the PSU shares; in other words, facility of ECB is available for multiple rounds of disinvestment of PSU shares under the Government disinvestment programme.
3. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.
4. 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 required, if any, under any other law.
Yours faithfully
(C D Srinivasan)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/302 · issued 30 Sep 2013. The plain-English explanation above is BankPulse’s own independent summary.
Ensure all ECB applications under this facility comply with extant ECB guidelines and FEMA provisions.
📜 Compliance
Update internal ECB policy to reflect that proceeds can be used for all stages of PSU disinvestment.
Advise customers that ECB is now available for multiple rounds of PSU share acquisition.
Monitor end-use declarations to confirm funds are used only for permitted disinvestment stages.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks handling ECB transactions, Corporate borrowers investing in PSU disinvestment, Government entities managing PSU disinvestment programmes), your first concrete step on “ECB Allowed for All Stages of PSU Disinvestment” is: “Update internal ECB policy to reflect that proceeds can be used for all stages of PSU disinvestment.” (RBI issued this 30 Sep 2013).
Circular: RBI/2013-14/302 -- ECB Allowed for All Stages of PSU Disinvestment
Issued: 30 Sep 2013
Action required: Update internal ECB policy to reflect that proceeds can be used for all stages of PSU disinvestment.
Action required: Advise customers that ECB is now available for multiple rounds of PSU share acquisition.
Action required: Ensure all ECB applications under this facility comply with extant ECB guidelines and FEMA provisions.
Action required: Monitor end-use declarations to confirm funds are used only for permitted disinvestment stages.
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=8475&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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