ECBs are commercial loans/borrowing raised by eligible resident entities/companies from recognized Non-resident entities/companies and should equal to parameters such as: –
- minimum maturity,
- permitted and non-permitted end-uses,
- maximum all-in-cost ceiling, etc.
The parameters apply in totality and not on a standalone basis.
ECB comprises the following three tracks for raising loans: –
Form of ECBs: –
- Loans including bank loans
- Securitised instruments (floating rate notes and fixed-rate bonds, non-convertible optionally convertible preference shares/debentures)
- Buyers’ credit
- Suppliers’ credit
- Foreign Currency Convertible Bonds (FCCBS)
- Financial Lease and
- Foreign Currency Exchangeable Bonds (FCEBs)
NOTE: – Foreign currency exchangeable bonds (FCEBs) can be issued only under the approval route. While others mentioned above can be raised both under the automatic and approval routes.
8. masala bonds
However, the external commercial borrowing (ECB) framework does not apply regarding investment in Non-convertible Debentures (NCDs) in India made by Registered Foreign Portfolio Investors (RFPIs).
The ECB’s are classified under 3 ‘Tracks’ under the new framework:
| Track I
(ECB over 3/5average maturity) |
Track II
(ECB over 10 years average maturity) |
Track III
(ECB over3/5average maturity) |
| Minimum Average Maturity | ||
| • Up to USD 50: 3 years.
• Beyond USD 50: 5 years.
• 5 years for eligible borrowers irrespective of the amount of borrowing.
• 5 years for FCCB/FCEBs irrespective of the amount of borrowing. The call and put option, if any, for FCCBs shall not be exercisable prior to 5 years. |
10 years, irrespective of the amount
|
• Up to USD 50: 3 years.
• Beyond USD 50: 5 years.
• 5 years for eligible borrowers irrespective of the amount of borrowing.
• 5 years for FCCB/FCEBs irrespective of the amount of borrowing. The call and put option, if any, for Foreign currency convertible bonds (FCCBs) shall not be exercisable prior to 5 years. |
Eligible Borrowers
| Track I
|
Track II
|
Track III
|
| • Companies in the following sectors:
· Manufacturing sector · Software development · Shipping and airlines companies
• Units in SEZs
• Small Industries and DevelopmentBank of India
• Holding companies’
• Exim Bank (approval route)
• Companies in infrastructure sectorNBFCs–IFCs, NBFCs – AssetsFinancecompanies, Holdingcompanies and core InvestmentCompanies (CICs). |
• All entities under Track I.
• Companies in the infrastructure sector (definition aligned with Harmonized Master List of Government of India).
• Holding companies
• Core investment companies.
• REITs and INVTTs registered with SEBI. |
•All entities listed under Track II.
• All NBFCs coming under the regulatory purview of the RBI.
• Entities engaged in micro finance activities, subject to conditions.
• Companies in Miscellaneous Services, viz. · R&D · Training (excluding educational institutes) · Companies supporting infrastructure · Logistic services
• SEZs/NMIZs Developers |
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by:
CS Neetu Saini
AKGVG & Associates