Foreign Exchange Management (Borrowing or Lending in Foreign Exchange ) Regulations, 2000Notification No.FEMA 3/2000-RB dated 3rd May 2000 - In exercise of the powers conferred by clause (d) of Sub-Section (3) of Section 6, sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the following regulations for borrowing or lending in foreign exchange by a person resident in India; namely:
1. Short Title and Commencement:- (a) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2009
(b) They shall be deemed to have come into force from the June 30, 2009.
(Above sub-regulations has been amended vide
NTF. NO. FEMA 197/2009-RB, DT. 22/09/2009)
[OLD-(a) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2009.
(b) They shall come into force from the dates specified in these regulations.
](Above sub-regulations has been amended vide
NTF. NO. FEMA 194/2009-RB, DT. 17/06/2009)
[OLD-(i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2009.
(ii) They shall be deemed to have come into effect from the 15th day of October, 2008 @.
](Above sub-regulations has been amended vide
NTF. NO. FEMA 182/2009-RB, DT. 13/01/2009)
[OLD-(a) These regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007.
(b) They shall come into force from the dates specified in these regulations.
](Above sub-regulation (a) & (b) has been amended vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007)
[OLD - (a) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2005.
(b) They shall be deemed to have come into force from April 25, 2005.@
@ It is clarified that no person will be adversely affected as a result of retrospective effect being given to these regulations.
](Above sub-regulations (i) & (ii) has been amended vide
NTF. NO. FEMA 142/2005-RB, Dt.06/12/2005)
[OLD - (i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2005.
(ii) They shall be deemed to have come into force from March 24, 2004.*
](Above sub-regulations (i) & (ii) has been amended vide
Ntf. No. FEMA 127/2005-RB, Dt.05/01/2005)
[OLD - (a) The Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004
(b) They shall come into force from the date specified hereunder.
](Above sub-regulations (a) & (b) has been amended vide
NTF. NO. FEMA 126/2004-RB, Dt.13/12/2004)
[OLD - (i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2004.
(ii) They shall come into force on their publication in the Official Gazette.
](Above sub-regulations (i) & (ii) has been amended vide
Ntf. No. FEMA 112/2004-RB, Dt.06/03/2004)
[OLD - (i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2003.
(ii) They shall come into force on their publication in the Official Gazette.
(Above sub-regulations (i) & (ii) has been amended vide
Ntf. No.FEMA 82/2003-RB, Dt. 10/01/2003)
1.These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2003.
2. They shall come into force from the date of their publication in the Official Gazette.
(Above sub-regulations 1. & 2. has been amended vide
Ntf. No.FEMA 80/2003-RB, Dt. 08/01/2003)
(i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2002.
(ii) They shall come into force on their publication in the Official Gazette.
(Above sub-regulations (i) & (ii) has been amended vide
Ntf. No.FEMA 75/2002-RB, Dt. 01/11/2002)
(i) These regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange ) (Amendment ) Regulations, 2002.
(ii) They shall come into force with effect from their publication in the Official Gazette.
(Above sub-regulations (i) & (ii) has been amended vide
Ntf. No.FEMA 60/2002-RB, Dt. 29/04/2002)
i. These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange)(Amendment) Regulations, 2000.
ii. They shall come into forece with immediate effect.
(Above sub-regulations (i) & (ii) has been amended vide Ntf. No. 26/2000-RB, dated 14th August, 2000)
(i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000.
(ii) They shall come into force on 1st day of June, 2000.
]2. Definitions:- In these regulations, unless the context otherwise requires -
a. `Act’ means the Foreign Exchange Management Act, 1999 (42 of 1999);.
b. ‘authorised dealer’ means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Act;
c. ‘EEFC account’, ‘RFC account’ mean the accounts referred to in the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000;
d. ‘FCNR (B) account’, ‘NRE account’ mean the accounts referred to in the Foreign Exchange Management (Deposit) Regulations, 2000;
e. ‘Indian entity’ means a company or a body corporate or a firm in India;
f. ‘Joint Venture abroad’ means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity;
g. ‘Schedule’ means the Schedule to these Regulations;
h. ‘Wholly owned subsidiary abroad’ means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and whose entire capital is owned by an Indian entity;
i. the words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.
3. Prohibition to Borrow or Lend in Foreign Exchange:- Save as otherwise provided in the Act, Rules or Regulations made thereunder, no person resident in India shall borrow or lend in foreign exchange from or to a person resident in or outside India:
Provided that the Reserve Bank may, for sufficient reasons, permit a person to borrow or lend in foreign exchange from or to a person resident outside India.
4. Borrowing and Lending in Foreign Exchange by an Authorised dealer:-
1. An authorised dealer in India or his branch outside India may lend in foreign currency in the circumstances and subject to the conditions mentioned below, namely:
i. A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may extend foreign currency loans in the normal course of its banking business outside India;
ii. An authorised dealer may grant loans to his constituents in India for meeting their foreign exchange requirements or for their rupee working capital requirements or capital expenditure subject to compliance with prudential norms, interest rate directives and guidelines, if any, issued by Reserve Bank in this regard;
iii. An authorised dealer may extend credit facilities to a wholly owned subsidiary abroad or a joint venture abroad of an Indian entity;
Provided that not less than 51 per cent of equity in such subsidiary or joint venture is held by the Indian entity subject to compliance with the Foreign Exchange Management (Transfer and Issue of Foreign Security) Regulations, 2000;
iv. An authorised dealer may, in his commercial judgment and in compliance with the prudential norms, grant loans in foreign exchange to his constituent maintaining RFC Account, against the security of funds held in such account.
(In above clause (iv), the words "EEFC Account or", has been omitted vide Ntf. No. 26/2000-RB, dated 14th August, 2000)[OLDiv) An authorised dealer may, in his commercial judgment and in compliance with the prudential norms, grant loans in foreign exchange to his constituent maintaining
EEFC Account or RFC Account, against the security of funds held in such account.
] v. A branch outside India of an authorised dealer may extend foreign currency loans against the security of funds held in NRE/FCNR deposit accounts maintained in accordance with the
Foreign Exchange Management (Deposit) Regulations, 2000.
(Pl. refer
A.P. (DIR Series) Cir No. 24/2002, Dt. 25/09/2002 for Guidelines for grant of foreign currency loans in India to holders of FCNR (B) Deposits)
vi. Subject to the directions or guidelines issued by the Reserve Bank from time to time, an authorised dealer in India may extend foreign currency loans to another authorised dealer in India.
vii. An authorised dealer may grant foreign currency loans in India against the security of funds held in FCNR (B) account to the account holder only, subject to the guidelines issued by the Reserve Bank in this regard.
(Clause (vii) has been inserted vide
NTF. NO. FEMA 82/2003-RB, DT. 10/01/2003)
2. An authorised dealer in India may borrow in foreign currency in the circumstances and subject to the conditions mentioned below, namely:
(i) An authorised dealer may borrow from his Head Office or branch or correspondent outside India upto fifty percent
[OLD -twenty five per cent
[OLD - fifteen per cent
- ] of his unimpaired Tier I capital or US$ 10 million, whichever is more, subject to such conditions as the Reserve Bank may direct.
(Above sub-regulations (i), words "fifty percent" has been amended vide
NTF. NO. FEMA 182/2009-RB, DT. 13/01/2009 wef. 15/10/2008)
(Above sub-regulations (i) bold words before OLD has been substituted vide
Ntf. No.FEMA 60/2002-RB, Dt. 29/04/2002)
Explanation: For the purpose of clause (i), the aggregate loans availed of by all branches in India of the authorised dealer from his Head Office, all branches and correspondents outside India, shall be reckoned.
[Deleted -(ii) An authorised dealer may borrow in foreign currency without limit from his head Office or branch or correspondent outside India for the purpose of replenishing his rupee resources, provided that -
(a) the funds borrowed are utilised for his own business operations and are not invested in call money or similar other markets;
(b) no repayment of the loan is made without the prior approval of Reserve Bank, which may be granted only if the authorised dealer has no borrowings outstanding either from Reserve Bank or other bank or financial institution in India and is clear of all money market borrowings for a period of at least four weeks prior to the week in which the repayment is made. ]
(ii) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may borrow in foreign currency in the normal course of its banking business outside India, subject to the directions or guidelines issued by the Reserve Bank from time to time, and the Regulatory Authority of the country where the branch is located.
(iii) An authorised dealer may borrow in foreign currency from a bank or a financial institution outside India, for the purpose of granting pre-shipment or post-shipment credit in foreign currency to his exporter constituent, subject to compliance with the guidelines issued by the Reserve Bank in this regard.
(Above clause (ii) has been deleted & subsequent clauses renumbered as (ii) and (iii) vide
Ntf. No. FEMA 127/2005-RB, Dt.05/01/2005)
5. Borrowing and Lending in Foreign Exchange by persons other than authorised dealer:-(1) An Indian entity may lend in foreign exchange to its wholly owned subsidiary or joint venture abroad constituted in accordance with the provisions of Foreign Exchange Management (Transfer or issue of foreign security) Regulations, 2000.
(2) A person resident in India may borrow, whether by way of loan or overdraft or any other credit facility, from a bank situated outside India, for execution outside India of a turnkey project or civil construction contract or in connection with exports on deferred payment terms, provided the terms and conditions stipulated by the authority which has granted the approval to the project or contract or export in accordance with the Foreign Exchange Management (Export of goods and services) Regulations, 2000.
(3) An importer in India may, for import of goods into India, avail of foreign currency credit for a period not exceeding six months extended by the overseas supplier of goods, provided the import is in compliance with the Export Import Policy of the Government of India in force.
(4) A person resident in India may lend in foreign currency out of funds held in his EEFC account, for trade related purposes to his overseas importer customer:
Provided that where the amount of loan exceeds U S $ 100,000, a guarantee of a bank of international repute situated outside India is provided by the overseas borrower in favour of the of the lender.
(Above proviso has been substituted vide
Ntf. No. FEMA 112/2004-RB, Dt.06/03/2004)
[OLD -Provided that,-
a. the aggregate amount of such loans outstanding at any point of time does not exceed US$ 3 million; and
b. where the amount of loan exceeds US$ 25,000, a guarantee of a bank of international repute situated outside India is provided by the overseas borrower in favour of the lender.
](5) Foreign currency loans may be extended by Export Import Bank of India, Industrial Development Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India Limited, Small Industries Development Bank of India Limited. or any other institution in India to their constituents in India out of foreign currency borrowings raised by them with the approval of the Central Government for the purpose of onward lending.
(6) Indian companies in India may grant loans in foreign currency to the employees of their branches outside India for personal purposes provided that the loan shall be granted for personal purposes in accordance with the lender’s Staff Welfare Scheme/Loan Rules and other terms and conditions as applicable to its staff resident in India and abroad.
(Sub-regulations (6) has been inserted vide
NTF. NO. FEMA 80/2003-RB, DT. 08/01/2003)
(6) An individual resident in India may borrow a sum not exceeding US $ 250,000/- or its equivalent form his close relatives outside India, subject to the conditions that-
a. the minimum maturity period of the loan is none year;
b. the loan is free of interest; and
c. the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debits to the NRE/FCNR account of the non-resident lender.
Explanation:Close relative means relative as defined in Section 6 of the Companies Act, 1956."
(Sub-regulations (6) has been added vide
Ntf. No.FEMA 75/2002-RB, Dt. 01/11/2002)
(Please refer
CIR. NO. 94/2003-04-RB, DT. 07/06/2004 - Exchange Earners Foreign Currency(EEFC) Account Scheme – Trade Related Loans/Advances)
6. Other borrowings in foreign exchange under Automatic Route or with prior approval of Reserve Bank of India under the Approval Route or as Trade Credit(1) A person resident in India, other than a branch or office in India owned or controlled by a person resident outside India, may raise in accordance with the provisions of the Automatic Route Scheme specified in Schedule I, foreign currency loans of the nature and for the purposes as specified in that Schedule; provided that this shall be deemed to have come into force with effect from February 1, 2004 except in relation to item 1(iv)(A)(c) of Schedule I which shall be deemed to have come into force with effect from February 23, 2004.
(2) A person resident in India who desires to raise foreign currency loans of the nature or for the purposes as specified in Schedule II and who satisfies the eligibility and other conditions specified in that Schedule, may apply to the Reserve Bank for prior approval to raise such loans; provided that this shall be deemed to have come into force with effect from February 1, 2004 except in relation to item 3(iii)(A)(c) of Schedule II which shall be deemed to have come into force with effect from February 23, 2004.
(3) Trade Credit not exceeding USD 20 million per import transaction shall be raised by borrowings subject to the terms specified in Schedule III hereto; provided that this shall be deemed to have come into force with effect from April 17, 2004.
[OLD-
6. Other borrowings in foreign exchange with prior approval of Reserve Bank or Government of India:- (1) A person resident in India who desires to raise foreign currency loans of the nature or for the purposes specified in the Schedule and who satisfies the eligibility and other conditions specified in that Schedule, may apply to the Reserve Bank for approval to raise such loans.
](4) Where prior approval is required the Reserve Bank may grant its approval subject to such terms and conditions as it may consider necessary;
Provided that while considering the grant of approval, the Reserve Bank shall take into account the overall limit stipulated by it, in consultation with the Central Government, for availment of such loans by the persons resident in India.
(5) The Reserve Bank may grant its approval to any other foreign currency loan proposed to be raised by a person resident in India, which falls outside the scope of Schedules I, II and III, subject to such terms and conditions as it may consider necessary.
(In Regulations 6, Heading and sub-regulation (1) - substituted, sub-regulation (2) shall be renumbered as (4) & words "Where prior approval is required" added at the beginning and existing sub-regulation (3) substitued by sub-regulation (5) vide
NTF. NO. FEMA 126/2004-RB, Dt.13/12/2004)
[OLD-(3) Any other foreign currency loan proposed to be raised by a person resident in India, which falls outside the scope of the Schedule, shall require the prior approval of the Central Government.
]SCHEDULE I
[(See Regulation 6(1)]
Borrowings in Foreign Exchange under the Automatic Route(1) Borrowing in Foreign Exchange up to US$ 500 Million or its equivalent
The borrowing in foreign exchange by a person resident in India under the Automatic Route is subject to the terms and conditions set out in this schedule.
(i) Eligibility
(a) Any company registered under the Companies Act, 1956, other than a financial intermediary (such as a bank, financial institution, housing finance company and a non-banking finance company) is eligible to borrow under this Schedule.
Provided that they have not at any time violated any of the provisions of these regulations and no investigation is pending against them for contravention of the provisions of these regulations under the Act.
(Above proviso has been inserted vide
NTF. NO. FEMA 197/2009-RB, DT. 22/09/2009)
(b) Non-Government Organisations engaged in micro-finance activities may borrow in foreign exchange under this Schedule under such terms and conditions as specified by the Reserve Bank from time to time.
Provided that they have not at any time violated any of the provisions of these regulations and no investigation is pending against them for contravention of the provisions of these regulations under the Act.
(Above proviso has been inserted vide
NTF. NO. FEMA 197/2009-RB, DT. 22/09/2009)
(c) Any other entity as specified by the Reserve Bank.
Provided that they have not at any time violated any of the provisions of these regulations and no investigation is pending against them for contravention of the provisions of these regulations under the Act.
(Above proviso has been inserted vide
NTF. NO. FEMA 197/2009-RB, DT. 22/09/2009)
(ii) Amount
(a) The borrowing in foreign exchange by an entity as specified in paragraph (i) (a) of section I of Schedule I, under the Automatic Route whether raised in tranches or otherwise, shall not exceed USD 500 million or equivalent in any one financial year (April – March).
(b) The borrowings in foreign currency under as specified in paragraph (i) (b) of section I of Schedule I, by a non-government organisation engaged in micro-finance activities shall not exceed USD 5 million or equivalent during a financial year (April – March).
(Above paragraph (1), sub-paragraph (i) & (ii) has been substituted vide
NTF. NO. FEMA 142/2005-RB, Dt.06/12/2005)
[OLD-i) Eligibility
Any corporate registered under the Companies Act, 1956 shall be eligible to borrow in terms of this Schedule. However, financial intermediaries (such as banks, financial institutions (FIs), housing financing companies, Non-Banking Finance Companies, Trusts, Non-Profit making organisations (NPOs), Micro Finance Institutions, proprietorship / partnership concerns and individuals are not eligible to borrow under the Automatic Route.
]ii) Amount
The borrowing in foreign exchange under the Automatic Route whether raised in tranches or otherwise shall not exceed US$ 500 Million in any one financial year (April-March).
]iii) Lenders
The borrowings in foreign currency by way of issue of bonds, floating rate notes or other debt instruments by whatever name called may be made from -
a) International bank or export credit agency or international capital market or
b) Multilateral financial institutions, namely, IFC, ADB, CDC etc., or
c) Foreign collaborator or foreign equity holder as specified by the Reserve Bank or
d) Supplier of equipments provided the amount of loan raised does not exceed the total cost of the equipment being supplied by the lender or
e) Any other eligible entity as prescribed by the Reserve Bank in consultation with Government of India
iv) Purpose (End-use)
A) Borrowing in foreign exchange in terms of this Schedule may be for any of the following purposes, namely: -
a) for investment (such as import of capital goods, new projects, modernisation / expansion of existing production units) in real sector - industrial sector including small and medium enterprises (SME) and infrastructure sector - in India.
Explanation: The following sectors will qualify as infrastructure sectors, namely,(i) Power, (ii) Telecommunication, (iii) Railways, (iv) Road including Bridges, (v) Sea Port and Airport (vi) Industrial Parks (vii) Urban Infrastructure (water supply, sanitation and sewage projects) and (viii) Mining, Exploration and Refining.
(Above Explanation has been substituted vide
NTF. NO. FEMA 194/2009-RB, DT. 17/06/2009 - wef 08/10/2008)
[OLD-Explanation : The following sectors will qualify as infrastructure sectors, namely:.
Power , Telecommunications, Railways, Roads including bridges, Ports, Industrial Parks and Urban infrastructure (water supply, sanitation and sewage projects),
] b) for first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Governments disinvestment programme of PSU shares,
c) for direct investment in overseas Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad.
(d) any other eligible purpose as specified by the Reserve Bank.
(Above sub-clause (d) has been inserted vide
NTF. NO. FEMA 142/2005-RB, Dt.06/12/2005)
(AA) Borrowings in foreign exchange per borrower company per financial year up to such amounts not exceeding US Dollars 500 million or its equivalent as directed by the Reserve Bank from time to time shall be permitted for such permissible end-uses as indicated by Reserve Bank from time to time.
(Above clause (AA) has been substituted vide
NTF. NO. FEMA 194/2009-RB, DT. 17/06/2009 - wef 29/05/2008)
[OLD-(AA) Borrowings in foreign exchange upto USD 500 million per borrower company per financial year shall be permitted only for foreign currency expenditure for permissible end-use.
](Above clause AA has been inserted vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007 - 07/08/2007)
B) Other than the purposes specified hereinabove, the borrowings shall not be utilised for any other purpose including the following purposes, namely:
On-lending, investment in capital (stock) market, investment in real estate business, working capital requirements, general corporate purpose, and repayment of Rupee loans
[OMITTED-Note - For the purpose of this clause, real estate business shall not include development of integrated township as defined by the Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, SIA (FC Division), Press Note 3(2002 Series) dated January 4, 2002.
](Above Note has been omitted vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007 - 21/05/2007)
v) Maturity
The maturity of the borrowings in foreign exchange shall be as under :
Amount Minimum Average Maturity
i) Up to US$ 20 Million or equivalent Not less than 3 years
ii) Exceeding US$ 20 Million and upto US$ 500 Million or equivalent
Not less than 5 years
Note - Borrowing up to US$ 20 Million can have call/put option provided the minimum average maturity of 3 years as prescribed above is complied with before exercising call/put option.
vi) All-in-cost ceilings
The all-in-cost ceilings for the borrowing in foreign exchange shall be specified by the Reserve Bank from time to time
vii) Security
The borrower shall be at liberty to provide security to the lender / suppliers, provided that-
a) Where the security is in form of immovable property in India or shares of a company in India, it shall be subject to Regulation 8 of Notification No.FEMA.21/ 2000-RB dated May 3, 2000 and Regulation 3 of Notification No.FEMA.20/2000-RB dated May 3, 2000, respectively.
b) Guarantee
Banks, financial institutions and Non-Banking Finance Companies shall not provide (issue) guarantee or Letter of Comfort or Standby Letter of Credit in favour of overseas lender on behalf of their constituents for their borrowings in foreign exchange.
viii) Prepayment
Notwithstanding the provisions of clause (v) above, prepayment of outstanding foreign currency loan may be made as per the directives issued by the Reserve Bank from time to time.
ix) Parking of loan amount -
The proceeds of borrowings in foreign exchange availed under the schedule may, pending utilisation for permissible end-uses, be parked abroad or in India as directed by the Reserve Bank from time to time.
(Above sub-paragraph ix) has been substituted vide
NTF. NO. FEMA 194/2009-RB, DT. 17/06/2009 - wef 22/10/2008)
[OLD-ix) Parking of loan amount abroad
The proceeds of borrowings in foreign exchange shall be parked abroad until actual requirement in India.
]x) Loan Agreement
The loan agreement entered into by the borrower with the overseas lender shall strictly conform with these Regulations.. The procedure for obtaining loan registration number would be prescribed by the Reserve Bank.
xi) Drawal of Loan
Draw-downs of borrowing in foreign exchange shall be made strictly in accordance with the terms of the loan agreement only after obtaining the loan registration number from the Reserve Bank.
xii) Reporting
The borrower shall adhere to the reporting procedure as specified by the Reserve Bank from time to time.
xiii) Debt Servicing
The designated Authorised Dealer (AD) shall have the general permission to make remittances of principal, interest and other charges in conformity with the guidelines on borrowing in foreign exchange from overseas, issued by Central Government / the Reserve Bank from time to time.
2. Refinancing of existing borrowing in foreign exchange
(i) Refinancing of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made thereunder, may be made by making fresh borrowing in foreign exchange in accordance with this Schedule provided that there is reduction in cost of borrowing and the outstanding maturity of the original borrowing is not reduced.
ii. Provisions of sub-paragraphs (ii), and (v) of paragraph 1 shall not apply to the borrowings made under Clause 2 (i),
SCHEDULE II
[See Regulation 6(2)]
Borrowings in Foreign Exchange under the Approval Route(1) The borrowing in foreign currency ( other than the borrowings under Schedule I) by a person resident in India may be made under any of the types set out in this Schedule.
(2) The application for the approval of the Reserve Bank under Regulation 6(2) for borrowing under any of the types where its approval is required shall be made in the Form as specified by the Reserve Bank from time to time.
(3) The borrowing in foreign exchange by a person resident in India under the Approval Route is subject to the terms and conditions set out in this schedule.
(i) Eligibility
The following entities shall be eligible to apply for foreign currency borrowings under the Approval Route -
a) Any corporate registered under the Companys Act, 1956.
b) Financial institutions dealing exclusively with infrastructure or export finance such as IDFC, IL& FS, Power Finance Corporation, Power Trading Corporation, IRCON and Exim Bank.
c) Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Central Government.
d) Entities falling outside the purview of the Automatic Route as per Schedule I.
e) Any other entity as specified by the Reserve Bank.
(Above clause (e) has been inserted vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007)
ii) Lenders
The borrowings in foreign currency by way of issue of bonds, floating rate notes or other debt instruments by whatever name called may be made from -
a) International bank or export credit agency or international capital market or
b) Multilateral financial institutions, namely, IFC, ADB, CDC etc., or
c) Foreign collaborator or foreign equity holder as specified by the Reserve Bank or
d) Supplier of equipments provided the amount of loan raised does not exceed the total cost of the equipment being supplied by the lender or
e) Any other eligible entity as prescribed by the Reserve Bank in consultation with Government of India
iii) Purpose (End-use)
A) Borrowing in foreign exchange in terms of this Schedule may be for any of the following purposes, namely :-
a) for investment (such as import of capital goods, new projects, modernisation / expansion of existing production units) in real sector - industrial sector including small and medium enterprises (SME) and infrastructure sector - in India.
Explanation: The following sectors will qualify as infrastructure sectors, namely,(i) Power, (ii) Telecommunication, (iii) Railways, (iv) Road including Bridges, (v) Sea Port and Airport (vi) Industrial Parks (vii) Urban Infrastructure (water supply, sanitation and sewage projects) and (viii) Mining, Exploration and Refining.
(Above Explanation has been substituted vide
NTF. NO. FEMA 194/2009-RB, DT. 17/06/2009 - wef 08/10/2008)
[OLD-Explanation : The following sectors will qualify as infrastructure projects, namely:-
i) Power, Telecommunications, Railways, Roads including bridges, Ports, Industrial Parks and Urban infrastructure (water supply, sanitation and sewage projects).
]b) for first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Governments disinvestment programme of PSU shares.
c) for direct investment in overseas Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad.
(AA) Borrowings in foreign exchange per borrower company per financial year up to such amounts as directed by the Reserve Bank from time to time shall be permitted for such permissible end-uses as indicated by Reserve Bank from time to time.
(Above clause (AA) has been substituted vide
NTF. NO. FEMA 194/2009-RB, DT. 17/06/2009 - wef 29/05/2008)
[OLD-(AA) External Commercial Borrowings upto USD 20 million per borrowing company per financial year for rupee expenditures for permissible end-use shall require prior approval of the Reserve Bank of India.
](Above clause (AA) has been inserted vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007 - wef 07/08/2007)
B) Other than the purposes specified hereinabove, the borrowings shall not be utilised for any other purpose including the following purposes, namely:-
On-lending, investment in capital (stock) market, investment in real estate business, working capital requirements, general corporate purpose and repayment of Rupee loans
[OMITTED-Note - For the purpose of this clause, real estate business shall not include development of integrated township as defined by the Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, SIA (FC Division), Press Note 3(2002 Series) dated January 4, 2002.
](Above Note has been omitted vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007 - wef 21/05/2007)
(iv) Maturity—(a) The maturity of borrowings in foreign exchange shall be as under :
| Serial Number | Amount | Average Maturity |
| (i) | Upto US $20 million or equivalent | Not less than 3 years |
| (ii) | Exceeding US $ 20 million and upto US $ 500 million or equivalent | Not less than 5 years |
| (iii) | Exceeding US $ 500 million and upto US $ 750 million or equivalent | More than 10 years |
(b) Borrowings upto US $ 20 million can have call/pit option provided the minimum average maturity of 3 years as prescribed in clause (a) is complied with before exercising call/put option;
(c) No prepayment and call/put options shall be permitted for borrowings in foreign exchange exceeding an amount of US $ 500 million and upto an amount of US $ 750 million or equivalent for a minimum average maturity of ten years.
(In above paragraph (3), sub-paragraph (iv) has been substituted vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007 - wef 04/12/2006)
[OLD-iv) Maturity
The maturity of the borrowings in foreign exchange shall be as under :
Amount Minimum Average Maturity
i) Up to US$ 20 Million or equivalent Not less than 3 years.
ii) Exceeding US$ 20 Million and upto US$ 500 Million or equivalent
Not less than 5 years
Note - Borrowing up to US$ 20 Million can have call/put option provided the minimum average maturity of 3 years as prescribed above is complied with before exercising call/put option.
]v) All-in-cost ceilings
The all-in-cost ceilings for the borrowing in foreign exchange shall be specified by the Reserve Bank from time to time
vi) Security
The borrower shall be at liberty to provide security to the lender / suppliers, provided that-
a) Where the security is in form of immovable property in India or shares of a company in India, it shall be subject to Regulation 8 of Notification No.FEMA.21/2000-RB dated May 3, 2000 and Regulation 3 of Notification No. FEMA. 20/2000-RB dated May 3, 2000, respectively.
b) Guarantee
Banks, financial institutions and Non-Banking Finance Companies shall not provide (issue) guarantee or Letter of Comfort or Standby Letter of Credit in favour of overseas lender on behalf of their constituents for their borrowings in foreign exchange.
Exception 1 – Banks, financial institutions and Non-Banking Finance Companies shall be permitted to provide Bank Guarantee, or Letter of Comfort or Standby Letter of Credit in favour of Small and Medium Enterprises (SMEs) with the approval of the Reserve Bank.
Exception- 2—Banks may provide Bank Guarantee, Standby Letter of Credit, Letter of Undertaking or Letter of Comfort in respect of ECB by textile companies for modernisation or expansion of their textile units, with the approval of the Reserve Bank.
(In paragraph (3), Exception 1 renumbered and Exception 2 added vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007 - wef 04/11/2005)
vii) Prepayment
Notwithstanding the provisions of clause (iv) above, prepayment of outstanding foreign currency loan may be made as per the directives issued by the Reserve Bank from time to time.
viii) Parking of loan amount -
The proceeds of borrowings in foreign exchange availed under the schedule may, pending utilisation for permissible end-uses, be parked abroad or in India as directed by the Reserve Bank from time to time.
(Above sub-paragraph (viii) has been substituted vide
NTF. NO. FEMA 194/2009-RB, DT. 17/06/2009 - wef 22/10/2008)
[OLD- viii) Parking of loan amount abroad
The proceeds of borrowings in foreign exchange shall be parked abroad until actual requirement in India.
]ix) Loan Agreement
The loan agreement entered into by the borrower with the overseas lender shall strictly conform with these Regulations. The procedure for obtaining loan registration number would be as specified by the Reserve Bank.
x) Drawal of loan
Draw-downs of borrowing in foreign exchange shall be made strictly in accordance with the terms of the loan agreement only after obtaining the loan registration number from the Reserve Bank.
xi) Reporting
The borrower shall adhere to the reporting procedure as specified by THE Reserve Bank from time to time.
xii) Debt Servicing
The designated Authorised Dealer (AD) shall have the general permission to make remittances of principal, interest and other charges in conformity with the guidelines on borrowing in foreign exchange from overseas, issued by Central Government / the Reserve Bank from time to time.
(4) Refinancing of existing borrowing in foreign exchange
(i) Refinancing of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made thereunder, may be made by making fresh borrowing in foreign exchange in accordance with this Schedule provided that there is reduction in cost of borrowing and the outstanding maturity of the original borrowing is not reduced.
(ii) Provisions of sub-paragraphs (iv) of paragraph 3 shall not apply to the borrowings made under Clause 4(i).
(5) No corporate registered under the Companies Act, 1956 shall avail domestic rupee denominated structured obligations credit enhanced by international banks, international financial institutions or joint venture partners, except with the prior approval of the Reserve Bank.
(Above paragraph (5) has been inserted vide
NTF. NO. FEMA 157/2007-RB, DT. 30/08/2007 - wef 01/08/2005)
SCHEDULE III
[See Regulation 6(3)]
Trade Credit1. Foreign currency credit/loan extended for imports in to India by the overseas supplier, bank and financial institution for original maturity of less than 3 years is hereinafter referred to as ‘Trade Credit’ for imports. Depending upon the source of finance, such trade credit includes suppliers’ credit or buyers’ credit.
2. Authorised Dealers (ADs) in foreign exchange are permitted to approve trade credits up to USD 20 million per import transaction for import of all items permissible under the Foreign Trade Policy (except Gold) with a maturity period (from the date of shipment) up to one year. For import of capital goods, ADs are permitted to approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years. No roll-over/extension will be permitted by the AD beyond the permissible period.
3. Trade Credit exceeding USD 20 million per import transaction will require the prior approval of the Reserve Bank of India.
(Above Schedule I, Schedule II and Schedule III has been replaced by
NTF. NO. FEMA 126/2004-RB, Dt.13/12/2004)
[OLD-SCHEDULE
[See Regulation 6]
Conditions of Raiseing Foreign Currency Loans1. The borrowing in foreign exchange by a person resident in India may be under any of the Schemes set out in this Schedule.
2. The application for the approval of the Reserve Bank under Regulation 6 for borrowing under any of the Schemes shall be made in Form ECB annexed to these Regulations.
3. The borrowing in foreign exchange may be from an overseas bank/export credit agency/ supplier of equipment or foreign collaborator, foreign equity holder,NRI,OCB, corporate/ institution with a good credit rating from internationally recognised credit rating agency, or from international capital market by way of issue of bonds, floating rate notes or any other debt instrument by whatever name called.
4. The borrower shall not utilise the funds borrowed under any of these Schemes for investment in stock market or in real estate business.
i. Short term loan scheme
a. Foreign currency credit extended by the overseas supplier of goods to an importer of goods for financing import of goods into India, provided the period of maturity of credit is more than six months but less than three years.
b. Foreign currency loan/credit extended to an importer in India for financing imports into India, by any bank or financial institution outside India, provided the period of maturity of loan/credit is less than three years.
ii. Borrowing under US dollar Five Million Scheme
Borrowing in foreign exchange upto US$ Five Million or its equivalent by an Indian entity for general corporate purposes at a simple minimum maturity of three years.
iii. Borrowing under US dollar Ten Million Scheme.
Borrowing in foreign exchange not exceeding US$ Ten Million or its equivalent by an Indian entity for the following purposes :
a. Borrowing for Financing of Infrastructure Projects
i. Borrowing in order to finance equity investment in a subsidiary/joint venture company promoted by the Indian entity for implementing infrastructure projects, provided that the minimum average maturity of loan is three years. In case the loan is to be raised by more than one promoter entity for a single project, the aggregate of loan by all promoters should not exceed US$ 10 million.
ii. Foreign currency loan raised by an Indian entity for financing infrastructure project, provided that the minimum average maturity of loan is not less than three years.
b. Borrowings by Exporter/Foreign Exchange Earner
Borrowing in foreign exchange by an exporter/foreign exchange earner upto three times of the average amount of his annual foreign exchange earnings during the previous three years subject to a maximum of US$ Ten million or its equivalent, with a minimum average maturity of three years.
c. Long term Borrowings
Borrowing for general corporate purposes at the minimum average maturity of eight years.
iv.
[OMITTED] - Scheme for raising loans from NRIs on repatriation basis Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that –
a. the loan is free of interest;
b. the minimum maturity period of the loan is seven years;
c. The amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender;
d. The loan is utilised for the borrower’s personal purposes or for carrying on his normal business activity but not for carrying on agricultural/plantation activities, purchase of immovable property or shares/debentures/bonds issued by companies in India or for re-lending.
Explanation: “Close relative” means relatives as defined in Section 6 of the Companies Act, 1956.
(Above Clause (iv) has been omitted vide
Ntf. No.FEMA 75/2002-RB, Dt. 01/11/2002)
]
FORM ECB
Application for permission to raise External Commercial
Borrowings under Short-Term Loan/Credit/USD 5/10
Million Scheme
Instructions: The application complete in all respects should be submitted in duplicate by the applicant through the authorised dealer designated by him to handle the matters relating to the foreign currency borrowings/credit to the Chief General Manager, Exchange Control Department, Central Office, ECB Division, Reserve Bank of India, Mumbai 400 001. In respect of short term loan/credit for imports, it should be submitted through the authorised dealer through whom the import documents have been received/will be received.
Documentation: Following documents, (as relevant) duly certified by authorised dealer, should be forwarded with the application:
- A copy of offer letter from the overseas lender/supplier furnishing complete details of the terms and conditions of proposed loan/credit arrangement.
- Copies of FIPB/SIA/CCEA approvals wherever applicable.
- In case the application is being made under Exporters’/Foreign Exchange Earners’ Scheme, bank certificates in respect of export realisation for past 3 years.
- If the applicant is NBFC, a copy of credit rating awarded by a recognised credit rating agency and copy of RBI registration certificate.
- A copy of the import contract, proforma/commercial invoice/Bill of Lading.
- A report from an international credit rating agency of repute, if the lender is other than the recognised category as per ECB Guidelines issued by the Government, from time to time.
- In case the payment for import is through Letter of Credit, a copy of L/C with amendments,if any.
PART-A-CATEGORY OF ECB APPLICATION The application is being submitted under following scheme :
(Please put (X) in the correct box)| (1) | Under short term credit/loan | |
| (2) | Under US$ 5 million Scheme | |
| (3) | Under US$ 10 million Scheme | |
| | (a) | Exporters’ /Foreign Exchange Earners’ Scheme | c |
| | (b) | Long Term Borrowers’ Scheme | c |
| | (c) | Infrastructure Projects | c |
| | (e) | Other (Please specify) | c |
PART-B- GENERAL INFORMATION ABOUT THE BORROWER| 1. | Name of the applicant
(BLOCK LETTERS) | : |
| | Address | : |
| 2. | Status of the applicant firm/company | Private Sector | Public sector | NBFC
(Indicate RBI
Registration
Number) |
- 3.
- Details of foreign Currency Loans (ECB) availed of and/or approval obtained by the applicant during past 3 years under US$ 5 Million Scheme
| RBI/GOI approval No. & date | Amount outstanding | Due date of final repayment |
| | | |
| | | |
| | | |
| | | |
| | | |
- 4.
- Details of ECB parked abroad
Sr.
No. | Name of the bank | Amount in USD equivalent | No. & date of RBI permission obtained
for parking funds abroad and validity
period thereof |
| | | | |
| | | | |
| | | | |
| | | | |
PART-C-INFORMATION ABOUT THE PROPOSED LOAN/CREDIT
- 1.
- Details of the loan/credit
| Currency | Amount | US$ equivalent |
Purpose of the loan
Nature of ECB(Please put (x) in the appropriate box)| (i) | Suppliers’ Credit | c |
| (ii) | Buyers’Credit | c |
| (iii) | Syndicated Loan | c |
| (iv) | Export Credit | c |
| (v) | Loan from foreign Collaborator/ equity holder | c |
| (vi) | FRN/ Bonds | c |
(vii)
| Others (please specify)
| c
|
Terms and conditions of the loan
|
| (i) | Rate of interest | |
| (ii) | Up front fee | |
| (iii) | Management fee | |
| (iv) | Other charges, if any (Please specify) | |
| (v) | All-in –cost | |
| (vi) | Commitment fee | |
| (vii) | Rate of Penal interest | |
| (viii) | Period of loan | |
| (ix) | Grace/ moratorium period | |
| (x) | Repayment terms (half yearly/ annually/bullet) | |
| (xi) | Average maturity | |
- 2.
- Details of the lender
Name and address of the lender/
supplier
- 3.
- Nature of security to be provided, if any.
PART-D-INFORMATION ABOUT DRAW DOWN AND REPAYMENTS| Proposed schedule |
| Dawn down | Repayment/payment |
| Month And Year | Amount | Principal | Interest |
| |
| |
| |
| |
| |
Part E-Additional Information required for
applications under Short Term Credit/Loan
| 1. | Particulars of commodity (ies)
to be imported
| Description | Value |
| 2. | Details of imports made/to be made
| Description | Value |
| | - (A)
- (i) Payment Terms
(ii) Due date of the import bill
(iii) Extension sought upto
(iv) If import has already been made
Value assessed as per Bill of
Entry
(Please enclose a copy)
|
| | - (B)
- If goods are yet to be received
(i) Date of shipment
(ii) Whether goods have been sold
on high Seas or any such sale is
contemplated ?
|
| 3. | Period upto which statement giving
details of drawals, utilisation & out-
standing has been submitted to RBI for
loans raised in the past. |
PART F – ADDITIONAL INFORMATION IN RESPECT OF ECB UNDER
USD 5/10 MILLION SCHEME - 1.
- Details of the project
| (i) | Total project cost in USD | |
| (ii) | Total ECB as a % of project cost | |
- 2.
- Export realisation (USD equivalent) of
the applicant during the last 3 years
(To be furnished only in case of applications
under Exporters’/Foreign Exchange Earners’
Scheme)
PART G – CERTIFICATIONS- 1.
- By the applicant
We hereby certify that -
- the particulars given above are true and correct to the best of our knowleldge and belief.
- the credit/loan to be raised will be utilised for the purpose for which it is being applied for vide this application and shall not be utilised for investment in stock market and real estate.
.................................................
(Signature of Authorised Official of the applicant)
Place :.....................
Date :.....................
|
|
Name :...................................
Designation :........................... |
- 2.
- By the authorised dealer –
We hereby certify that –
- the applicant is our customer.
- we have scrutinised the application and the original letter of offer from the lender/supplier and also all the documents relating to the import/proposed import, proposed borrowing /financing arrangement and have found the same to be in order.
...................................
(Signature of Authorised Official)
Place :.....................
Date :.....................
|
|
Name :.........................................
Name of the Bank/branch :...............
A.D. Code :................................... |
(Note:- Check category Documents & Forms for Form ECB)(Please refer
CIR. NO. 74/2003-04-RB, DT. 20/02/2004 - FEMA 1999 - Grant of Loans by Indian Companies to the Employees of their Branches Outside India)
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