ECB refers to commercial loans in the form of --
Ø Bank loan,
Ø supplier credit,
Ø Buyer credit or
Ø scrutinizes instruments (including non-convertible, partial convertible or optional convertible preference shares)
availed from non-resident lenders with a minimum average maturity of 3 years.
FCCB means a bond issued by the Indian company, denominated in foreign currency, principal & interest payable in foreign currency, issued in accordance with FCCB & ordinary shares (through depository receipt mechanism) scheme,1993 & subscribed by non-resident in foreign currency & convertible to shares, wholly/partly on the basis of any equity warrants attached to debt instruments.
AUTOMATIC ROUTE:
Recognized Lenders
1. International banks
2. International capital markets
3. Multinational financial institutions
4. Export credit agencies
5. Supplier of equipments
6. Foreign collaborators
7. Foreign equity holders
In case of foreign equity holders, following criteria should be satisfied:
Ø For ECB upto USD 5 million – minimum 25% paid up capital should be held directly by lender
Ø Above USD 5 million – in addition to 25% shareholding, debt-equity ratio should not exceed 4:1 (i.e. proposed ECB should not exceed 4 times of equity holdings).
Overseas organizations proposing to lend shall submit Due diligence certificate to AD Bank of borrower.
Amount & Maturity:
Maximum ECB allowed is USD 500 million or equivalent in a financial year except in hotol, hospital & software sector, where only USD 100 million is allowed.
ECB up to USD 20 million or its equivalent in a financial year with minimum average maturity of 3 years
ECB above USD 20 million to USD 500 million or its equivalent in a financial year with minimum average maturity of 5 years.
All-in cost ceilings
Include interest rate, other fees & expenses in foreign currency. Following are the ceilings:
Av.maturity period | All-in cost ceilings over 6 months LIBOR* |
3-5 years | 300 basis point |
Above 5 years | 500 basis point |
* for the respective currency of borrowing or applicable benchmark.
End use:
Ø Investment – import of capital goods, new project, expansion/modernization of existing project
Ø Overseas investment in JV/WOS abroad
Ø Spectrum allocation
End-use not permitted for:
Ø On-lending or investment in capital market or acquiring an Indian company
Ø Real estate sector
Ø Working capital requirement
Ø Guarantees
Ø Repayment existing rupee loan
Ø General corporate purpose
Parking of ECB proceeds:
Borrowers are permitted to park the ECB proceeds either abroad or to remit to India, pending utilization for permissible end uses. ECB proceeds parked outside India can be invested by way of :
Ø Deposit or other products offered by the Banks
Ø Treasure bill or other monetary instruments having one year maturity
Ø Deposit with overseas branch/subsidiaries of Indian banks
Prepayment:
Prepayment is allowed up to USD 500 million without RBI approval subject to fulfillment of minimum average maturity.
Re-financing of existing ECB:
The existing ECB can be re-financed by raising fresh ECB subject to the condition that new ECB is raised at lower all-in cost and outstanding maturity of the original ECB is maintained.
Procedure:
1. Loan Agreement
2. Obtaining Loan Registration Number
Ø Form 83 in duplicate, certified by CA/CA to the AD Bank
3. Drawing the ECB (after obtaining LRN)
4. Filing ECB -2 every month within 7 working days after the closure of the month.
APPROVAL ROUTE:
Banks, NBFCs, Financial Institutions, FCCB by housing finance companies, Corporates violated ECB rules, cases falling outside automatic route will be covered by approval route.
Recognized Lenders
1. International banks
2. International capital markets
3. Multinational financial institutions
4. Export credit agencies
5. Supplier of equipments
6. Foreign collaborators
7. Foreign equity holders
For Foreign equity holders, minimum shareholding of 25% and debt-equity ratio should not exceed 4:1 (i.e. proposed ECB should not exceed 4 times of equity holdings).
Amount & Maturity:
Additional amount of USD 250 million is allowed during the financial year in addition to USD 500 million.
All-in cost ceilings
Include interest rate, other fees & expenses in foreign currency. Following are the ceilings:
Av.maturity period | All-in cost ceilings over 6 months LIBOR* |
3-5 years | 300 basis point |
Above 5 years | 500 basis point |
* for the respective currency of borrowing or applicable benchmark.
End use:
Ø Investment – import of capital goods, new project, expansion/modernization of existing project
Ø Overseas investment in JV/WOS abroad
Ø Spectrum allocation subject fulfillment of certain conditions
End-use not permitted for:
Ø On-lending or investment in capital market or acquiring an Indian company
Ø Real estate sector
Ø Working capital requirement
Ø Guarantees
Ø Repayment existing rupee loan
Ø General corporate purpose
Parking of ECB proceeds:
Borrowers are permitted to park the ECB proceeds either abroad or to remit to India, pending utilization for permissible end uses. ECB proceeds parked outside India can be invested by way of :
Ø Deposit or other products offered by the Banks
Ø Treasure bill or other monetary instruments having one year maturity
Ø Deposit with overseas branch/subsidiaries of Indian banks
Prepayment:
Prepayment is allowed up to USD 500 million without RBI approval subject to fulfillment of minimum average maturity. Prepayment in excess of USD 500 million will be considered by RBI under approval route.
Re-financing of existing ECB:
The existing ECB can be re-financed by raising fresh ECB subject to the condition that new ECB is raised at lower all-in cost and outstanding maturity of the original ECB is maintained.
Foreign Currency Exchangeable Bonds (FCEB):
FCEB means bonds
Ø expressed in foreign currency,
Ø principal & interest is payable in foreign currency
Ø subscribed by a person resident outside India
Ø Exchangeable to equity shares of another company called as offered company, wholly/partly on the basis of equity warrants attached to the debt instruments.
Eligible issuer:
The issuer company should belong to the promoter company of the offered company and should hold the equity being offered at the time of issuance of FCEB.
Note: Offered company shall be listed company and engaged in the sector eligible for receiving FDI and eligible to issue/avail FCCB/ECB.
End-use of FCEB proceeds:
1. Investment in JV/WOS abroad
2. Investment in promoter group company
Note: Promoter group companies receiving the investment may utilize the same in accordance with end-use prescribed by ECB guidelines. However investment in capital market or real estate in India is prohibited.
All-in- cost: As per ECB policy
Pricing of FCEB:
At the time of issuance of FCEB the exchange price of offered equity shares shall not be less that higher of the following two –
Ø The average of the weekly high and low of the closing prices of the shares of the offered company on the stock exchange during 6 months preceding the relevant date;
Ø The average of the weekly high and low of the closing prices of the shares of the offered company on the stock exchange during 2 weeks preceding the relevant date
Average Maturity:
Minimum maturity shall be 5 years. The exchange option can be exercised at time before redemption. However cash settlement is not permissible.
Trade Credit for import into India:
Supplier Credit
Credit for import into India extended by overseas suppier.
Buyer’s credit:
Loans for payment of import into India arranged by the importer from a bank or financial institution outside India for maturity of less than 3 years.
Note: Supplier’s credit & Buyer’s credit for 3 years & above come under the category of ECB.
Amount & Maturity:
AD banks are permitted to approve trade credits for imports into India upto USD 20 million per import transaction for imports permissible under Foreign Trade Policy of the DGFT with the maturity period up to one year (from the date of shipment).
For import of capital goods (specified by DGFT) trade credit upto USD 20 million per transaction with the maturity period of more than one year but less than 3 years is permitted.
All-in-cost ceiling
Ø 200 basis points
Ø It includes arranger fee, upfront fee, management fee, handling / processing charges, out of pocket, legal expenses etc.
Guarantee
Ø AD banks are permitted to issue LC/Guarantees/Letter of undertakings/Letter of comport in favour of overseas supplier, banks & financial institution up to USD 20 million per transaction up to one year for import of non-capital transactions.
Ø Up to 3 years for import of capital transactions.
No comments:
Post a Comment