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As per the extant guidelines, non-banking financial companies (NBFCs) are allowed to avail of ECB under approval route from multilateral financial institutions, reputable regional financial institutions, official export credit agencies and international banks with minimum average maturity of 5 years to finance import of infrastructure equipment for leasing to infrastructure projects.
The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India had, vide Press Notes 2 and 3 (2009 series) dated February 13, 2009, issued guidelines for calculation of total foreign investment, i.e., direct and indirect foreign investment in Indian companies and for establishment of Indian companies/ transfer of ownership or control of Indian companies from resident Indian citizens to non-resident entities
Freedom currently available to NBFCs to raise funds through NCDs without any restriction has resulted in inadequate resource planning and higher transaction cost. One of the main objectives of the said circular is to promote discipline in resource planning and raising.
On a review, it has been decided to increase the time limit and henceforth the exporter undertaking Project Exports and Service contracts abroad should submit form DPX1, PEX-1 and TCS-1 to the Approving Authority (AA) i. e. AD Bank / Exim Bank / Working Group, within 30 days of entering into contract for grant of post-award approval.
The above modifications to the ECB guidelines will come into force with immediate effect. All other aspects of the ECB policy, such as eligible borrower, recognized lender, end-use, all-in-cost ceiling, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements etc. shall remain unchanged.
On invocation of such credit enhancement, if the guarantor meets the liability and if the same is permissible to be repaid in foreign currency to the eligible non-resident entity, the all-in-cost ceilings, as applicable to the relevant maturity period of the Trade Credit / ECBs as per extant guidelines, would apply to the novated loan.
Under the provisions of the said section, AD Category I banks are required to verify on a periodical basis that the forward cover outstanding is supported by underlying exposures. In this context, it is clarified that in case an FII intends to hedge the exposure of one of its sub-account holders, (cf paragraph 4 of schedule 2 to Notification No. FEMA 20/2000-RB dated May 3, 2000) it will be required to produce a clear mandate from the sub-account holder in respect of the latter’s intention to enter into the derivative transaction. Further, the AD Category I banks shall have to verify the mandate as well as the eligibility of the contract vis-a-vis the market value of the securities held in the concerned sub-account.
As per the extant policy, the payment for spectrum allocation may initially be met out of the Rupee resources by the successful bidders, to be refinanced with a long term ECB, under the approval route, subject to the condition that ECB should be raised within 12 months from the date of payment of the final installment to the Government.
Considering the developments in the global financial markets and on a review of the aforesaid scheme, it has been decided that the existing scheme of Buyback / Prepayment of FCCBs under the approval route which expired on March 31, 2013 may be continued till December 31, 2013 and shall stand discontinued thereafter.
In terms of paragraph 2 (iii) of the aforesaid circular, the ECB for working capital for civil aviation sector should be raised within twelve (12) months from the date of issue of the circular. On a review, it has now been decided that the scheme of availing of ECB for working capital for civil aviation sector will continue till December 31, 2013.