ECB is commercial loan
Finance from non resident lender
Finance for expansion and fresh investment
The framework for raising loans through ECB comprises the following three tracks :
Track I : Medium term F/C ECB with minimum average maturity of 3/5 years
Track II : Long term F/C ECB with average maturity of 10 years
Track III : Indian Rupee(INR) ECB with minimum average maturity of 3/5 years
Access to ECB
Automatic Route :
Upto USD 750 Mio or equv. For companies in infrastructure and manufacturing sectors :
Upto USD 200 Mio or equv. For companies in software development sector :
Upto USD 100 Mio or equv. For companies engaged in micro finance activities :
Upto USD 500 Mio or equv. For remaining companies :
Approval Route :
ECB proposals beyond aforesaid limits will come under the approval route.
All in Cost
ECB under Track I : ECB with minimum average maturity period of 3 to 5 years : 300 bps per annum over 6 month LIBOR.
ECB with minimum average maturity period of more than 5 years : 450 bps per annum over 6 month LIBOR.
ECB under Track II : ECB with minimum average maturity period of 10 years : 500 bps per annum over 6 month LIBOR.
ECB under Track III : ECB in Indian Rupee with minimum average maturity of 3/5 years : As per prevailing market conditions.
In case of default 2% penal interest. .
Other conditions for Both Routes
End use-Industrial, infrastructure and specified service sector
End use-Not permitted for on lending or investment in capital market and in real estate
Utilization of ECB proceeds is permitted for disinvestment process of PSU under Govt. plan
Security as per FEMA guidelines
Borrowers are permitted to keep ECB proceed abroad or to remit these funds to India pendingutilization
Prepayment of ECB up to USD 500Mio without RBI permission subject to minimum maturity period
Factoring & Forfaiting
The arrangement in which, short term domestic receivables on sale of goods and services are sold to an agency (factor) is called the factoring.
It represents the purchase of obligation, which fall due at some future date and arise from delivery of goods or services in export transactions, without recourse to the previous holder of the obligation.