India: Revised ECB Framework: Simpler Or More Complex?

As part of easing capital account controls on the Indian economy, the Reserve Bank of India (RBI) has gradually been liberalizing regulations on external commercial borrowings (ECBs) from overseas lenders. A report of the Committee to Review the Framework of Access to Domestic and Overseas Capital Markets in February 2015 noted that: (a) ECBs are susceptible to currency fluctuation risk which in turn could affect "systemic stability"; (b) the regulatory framework for ECBs must be consistent and the approach must be predictable; (c) any regulations must be principle-based and not prescriptive; and (d) the ECB framework must be sector and participant neutral in that it should not discriminate among types and categories of borrowers and end-uses.

In view of the above, the report presented what must be described as radical recommendations: (i) removing all restrictions on borrowers, lenders, end-use, amount, maturity, and all-in cost ceilings; (ii) aligning the negative list in the ECB framework with that of the foreign direct investment policy; (iii) permitting all lenders from a Financial Action Task Force compliant jurisdiction; and (iv) requiring borrowers to demonstrate hedging prior to obtaining ECBs. Notably, the committee also recommended disallowing overseas branches of Indian banks from extending ECBs to Indian borrowers. While the government and the RBI reportedly disagreed with the recommendations, concerned that they would open the proverbial floodgates and risk economic instability, both appeared willing to engage in consultations to reform the ECB framework.

With this background, the RBI's release of the draft framework on ECBs on 23 September for public comments came as a pleasant surprise to market participants. Taking the form of a simplified list of "dos" and "don'ts" for raising ECBs, the draft framework proposed easing the prevailing requirements around eligible borrowers and end-uses, and also proposed expanding the scope of recognized lenders to include pension funds, sovereign wealth funds, insurance funds, and other "long term investors". The draft framework also emphasized shifting the currency risk to overseas lenders and further proposed introducing a "small negative list" for rupee denominated borrowings.

On 30 November (without any prior indication) the RBI issued the revised ECB framework, with a cover note saying that it reflects a "more liberal" approach with fewer restrictions on end-use and all-in-cost, and places the currency risk on the lender in case of rupee denominated ECBs. The revised framework retains the expanded scope of recognized lenders to include insurance companies and pension funds, and also retains the concept of a smaller negative list for end-uses for long-term ECBs and rupee denominated ECBs.

The revised framework divides ECBs into three tracks: track I for medium-term foreign currency denominated ECBs with a "minimum average maturity" (MAM) of three to five years; track II for long-term foreign currency denominated ECBs with a MAM of 10 years; and track III for rupee denominated ECBs with a MAM of three to five years. While the revised framework states that lending by overseas branches of Indian banks is subject to prudential guidelines, it also says that these branches are not eligible lenders for the purposes of tracks II and III.

While the procedural framework such as obtaining a loan registration number and periodic reporting to the RBI in the prescribed form remains unchanged, the revised framework significantly reduces the complexity of the previous ECB framework around eligible borrowers, recognized lenders, etc. The list of eligible borrowers under track II also includes real estate investment trusts and infrastructure investment trusts.

The revised framework further confirms that overseas long-term investors such as prudentially regulated financial entities, pension funds and insurance companies will be considered as eligible lenders, and also includes financial institutions in international financial services centres in India, thereby tying in with the government's initiative of establishing such centres in India. For rupee denominated ECBs, the revised framework does not prescribe any all-in-cost and instead states that this should be in line with market conditions.

The revised framework reflects the progressive movement of regulatory practice to a mix of principle and prescription-based regulation. However, due to some lacunae in the framework it is a non-starter for the moment. For instance, while the previous framework contained a detailed MS Excel-based methodology for determining "average maturity period", the revised framework does not prescribe how to determine MAM. Further, the revised framework notes that it will be effective from the date of publication of the relevant regulations under the Foreign Exchange Management Act, 1999, in the official gazette. As such regulations have not yet been published, the date of commencement of the revised framework is unknown.

Some think that the ECB framework could have done with another round of public discussions in view of the seminal changes it has introduced. Overall, while the issuance of the revised framework is a welcome initiative, its implementation could have been smoother and better planned.

This article was first published in the December 2015/January 2016 issue of the India Business Law Journal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions