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External Commercial Borrowing

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External Commercial Borrowing BFM

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

¤Approval route 

Individual Limits

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

Factoring :

   The arrangement in which, short term domestic receivables on sale of goods and services are sold to an agency (factor)  is called the factoring.

Forfaiting :

    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.

be continue……

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