As per existing External Commercial Borrowings policy norms, ECB proceeds could not be utilized by the borrowers for the following purposes. (i) Working capital purposes,
(ii) General corporate purposes,
(iii)Repayment of Rupee loans except when the ECB is availed from foreign equity holder for a minimum average maturity period of 5 years.
(iv) On-lending for above activities out of ECB proceeds is also prohibited.
With a view to liberalise the ECB framework, RBI vide its circular dated Jul 30, 2019 RBI has relaxed the end-use restrictions on external commercial borrowings for Working Capital requirements, General Corporate purposes and Repayment of rupee loans. Thus, eligible borrowers will now be permitted to raise ECBs for the following purposes from recognised lenders, except foreign branches/ overseas subsidiaries of Indian banks.
The Reserve Bank circular addressed to All Category-I Authorised Dealer Banks stipulates that prescribed minimum average maturity provision, as above, for the aforesaid end-uses will have to be strictly complied with under all circumstances.
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