India: Relaxation In External Commercial Borrowings Guidelines

Last Updated: 8 May 2018
Article by SKP  

Vide notification RBI/2017-18/169 issuing A. P. (DIR Series) Circular No. 25 (hereinafter referred to as Circular) dated 27 April 2018, the Reserve Bank of India (RBI), in consultation with the Government of India, relaxed the guidelines on External Commercial Borrowings (ECB).

Corporates and other entities planning to avail ECB to meet their capital needs were repeatedly approaching RBI for relaxations in the existing ECB framework. In light of the requests received and experience gained in administering the ECB regime, the circular liberalizes the earlier rules regarding the permissible end-use of ECB, expands the list of eligible borrowers by giving an opportunity to more entities, rationalizes the equity to ECB ratio and simplifies the all-in cost for availing ECB.

Following are the key amendments which have been brought by the circular:

Key Points Change brought by the circular
All-in-cost It has been decided to have a flat all-in-cost ceiling, uniform at 450 basis points over the benchmark for ECB and Rupee Denominated Bonds (RDBs) (commonly referred to as Masala Bonds). The benchmark under Track I and Track II would be London Interbank Offer Rate (LIBOR) and for Track III would be the prevailing yield of G-Sec of the corresponding maturity.

This change has done away with different slabs of cost for different maturities.
Permissible end-use It has been decided to have only a negative list under all the tracks to bring uniformity.

The negative list is:
  • Under Track I, II, and III shall be as under:

    1. Investment in real estate or purchase of land except when used for affordable housing as defined in Harmonized Master List of infrastructure sub-sectors notified by the Government of India, construction, and development of Special Economic Zones (SEZ) and industrial parks/integrated townships.
    2. Investment in the capital market.
    3. Equity investment.
  • For Tracks I and III:

    1. Working capital purposes.
    2. General corporate purposes.
    3. Repayment of Rupee loans.
      (These entities will be allowed to raise ECB when raised from direct and indirect equity holders or from a group company, and the loan such raised is for a minimum average maturity of five years)
  • Furthermore, for all three tracks:

    1. On-lending to entities for the above activities from (a) to (f).
Earlier, the negative list was only under Track II and Track III.
ECB liability to equity ratio It is decided to increase the ECB liability to equity ratio under automatic route for ECB raised from direct foreign equity holder to 7:1 which was earlier limited to 4:1. Under approval route, ECB can be availed above the ratio of 7:1.

This ratio will not be applicable if the total of all ECBs raised by an entity is up to USD 5 million or equivalent.
Eligible borrowers' list It has been decided to permit the new eligible borrowers as under:
  • Under Tracks I, II and III:

    1. Housing finance companies, regulated by the National Housing Bank.
    2. Port Trusts constituted under the Major Port Trusts Act, 1963 or Indian Ports Act, 1908.
      (These entities shall have a board-approved risk management policy and shall keep their ECB exposure hedged 100% at all times for ECBs raised under Track I)
  • Under Track III only:

    1. Companies engaged in the business of maintenance, repair and overhaul and freight forwarding to raise ECBs denominated in INR only, like issuing a rupee-denominated bond in overseas markets.

SKP's Comments

The relaxation brought is very viable and a lot of new investments may be expected. By allowing ECB for the purchase of land for affordable housing construction companies and bringing housing finance companies under automatic route opens a new route of financing for a sector with massive growth due to a home shortage in the country. The port sector has also been allowed to avail ECB recognizing that companies require increased flexibility and access to various types of financing. The ratio will help big businesses to tap foreign markets without having to take approval for a lot higher amount of ECB borrowings. The offshore funding has been made much more accessible by the above circular, it is to see how the entities now explore this newly abled area here onwards.

  • Pre-investment regulatory advisory
  • Entity formation
  • Business registrations

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.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
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