What are the various types of ECB?

ECBs can be raised as:

1. Loans, eg., bank loans, loans from equity holder, etc.

2. Capital market instruments, e.g.,

a. floating rate notes / fixed rate bonds / securitised instruments

b. non-convertible, optionally convertible or partially convertible preference shares
c. FCCB*
d. FCEB*

3. Buyers credit / suppliers credit

4. Financial lease

* A foreign currency convertible bond (FCCB) is a type of corporate bond issued by an Indian
company in an overseas market in a currency different from that of the issuer. Investors have the
option of redeeming their investment on maturity or converting the bonds into equity any time
during the currency of the bond. The repayment of the principal is in the currency in which the
money is raised. In case of a foreign currency exchangeable bond (FCEB), investors have the
option of converting the bonds into equity of the offered company. The company issuing FCEB
shall be part of the promoter group of the offered company and shall hold the equity shares
being offered at the time of issuance of FCEB.

Is a Limited Liability Partnership (LLP) or Partnership firm or Proprietary concern eligible to

raise ECB?

No, entities which are not covered within the provisions contained in Master Direction stated
above [like companies doing trading business (whether online or otherwise), companies involve
in activities like tourism, beauty parlour / beauty clinics, entertainment business, retail sales, e-
commerce companies, etc., on any other activity not covered within these provisions] are not
eligible to raise ECB.

What are the requirements in respect of currencies of ECB?

ECB can be raised in Indian Rupees (INR) and / or any convertible currency. Any entity raising
INR denominated ECB is not permitted to convert the liability arising out of this ECB into
foreign currency liability in any manner or assuming foreign currency risk is any manner by
either entering into a derivative contract or otherwise.

Whether the minimum average maturity period under the Track I of the ECB framework is solely
decided on the basis of amount of ECB? Whether the minimum maturity of 5 years is applicable
only to ECBs of ticket size beyond USD 50 million or equivalent and above? What about ECB
raised under the Track II?
No, the applicable minimum average maturity period for an ECB under Track I would be
decided not only from the amount of ECB but also from the all-in-cost of the ECB. For example,
for an ECB of amount less than USD 50 million, if the all-in-cost is exceeding Libor + 300 bps
per annum, the applicable minimum maturity period would be 5 years. For ECBs of ticket size
beyond USD 50 million equivalent and for ECBs of any ticket size when the aggregate ECB
borrowing during a financial year breaches USD 50 million equivalent under Track I, the
minimum average maturity period shall be 5 years. Any ECB raised under Track II of the ECB
framework, irrespective of the amount, should have minimum average maturity of 10 years.

Can for an ECB raised under Track I for general corporate purpose (which is permitted only for
direct foreign equity holder), repayment of principal of ECB start before the completion of 5
years?

Yes, however, the ECB should have minimum average maturity period of 5 years

Can ECB be raised under Track II for general corporate purpose (including working capital)?
What will be its minimum average maturity period?

Yes, ECB can be raised under Track II for general corporate purpose (including working capital).
The minimum average maturity period will be 10 years.

Can ECB be raised under Track III for general corporate purpose (including working capital)?
What will be its minimum average maturity period?

Yes, ECB can be raised under Track III (i.e INR denominated ECB) for general corporate
purpose (including working capital). The minimum average maturity period will be 3 years for
ECB upto USD 50 million or equivalent and 5 years for ECB beyond USD 50 million or
equivalent.

Can ECB be availed for repayment of domestic INR loan?

Yes, provided the ECB is raised under the Track II and III of the ECB framework. However, it is
not permitted for NBFCs, developers of SEZs/NMIZs, NBFC-MFIs, NGOs and not for profit
companies.

Can overseas bank give guarantee for ECB?

An overseas bank (not overseas branches / subsidiaries of Indian bank) is permitted to give
guarantee from overseas for ECB, provided it is recognised as ECB lender as per extant ECB
guidelines. It may be noted that guarantee fee will form part of all-in-cost of the ECB

What are the major requirements for Indian banks to participate in ECB space?

Indian banks are not permitted to raise ECB. They can act as ECB lenders (through their
overseas branches / subsidiaries) only under Track I of the ECB framework duly ensuring that
the applicable prudential norms are complied with. They are, however, not permitted to refinance
existing ECBs. Further, any case involving repayment/refinancing of any foreign currency loan
by way of rupee loans from Indian banks, prudential guidelines stipulated in paragraph 4(b) of
Circular No. BP.BC.85/21.04.048/2014-15 dated April 06, 2015 issued by the Department of
Banking Regulation (DBR) of RBI will be applicable which interalia state that such refinance
shall be treated as restructuring (and classified/provided for as per extant prudential norms on
income recognition, asset classification and provisioning), if the above is extended to a borrower
who is under financial difficulty and involve concessions that the bank would otherwise not
consider. It should also be noted that if the ECB borrower concerned has availed credit facilities
from the Indian banking system including overseas branches/subsidiaries, any extension of
tenure / change in average maturity period of ECB / change in all-in-cost of ECB/ conversion of
unpaid ECBs into equity (whether matured or not) shall be subject to applicable prudential
guidelines issued by the DBR of RBI, including guidelines on restructuring, as applicable.
Further, such conversion of ECB into equity shall also be subject to consent of other lenders, if
any, to the same borrower or at least information regarding conversions shall be exchanged with
other lenders of the borrower.