Snapshot: Non-Debt Instruments (NDI) Rules in Relation to Foreign Investment and ECB
The Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, notified by the Central Government under the FEMA Act, regulate foreign investment in India in equity and equity-linked instruments. While ECBs fall under the debt category and are governed separately, understanding NDI Rules is critical where ECB transactions involve equity-related security creation (e.g. pledge of shares) or…
Read article Rules Governing Pledge of Shares – Operational Guidelines under the ECB Framework
Under India’s External Commercial Borrowing (ECB) framework, companies are permitted to pledge shares to secure ECBs, subject to specific regulatory conditions. These provisions ensure that such pledges are aligned with corporate governance norms and foreign exchange regulations, while also protecting the interests of stakeholders. Key Operational Guidelines for Pledge of Shares in ECB Regulatory and…
Read article List of Prohibitory Sector/End-Use Restrictions under External Commercial Borrowings (ECB) Framework
External Commercial Borrowings (ECB) are an important source of foreign funding for Indian entities. However, the Reserve Bank of India (RBI) has laid down specific guidelines restricting the end-use of ECB proceeds to ensure prudent use of external debt and financial stability. These restrictions apply to all borrowers, with limited exceptions. Prohibited End-Uses of ECB…
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Comprehensive overview of External Commercial Borrowings (ECB): Eligible investors, investees, and investment instruments
IntroductionExternal Commercial Borrowings (ECBs) are commercial loans extended to Indian borrowers by non-resident lenders. These may take the form of bank loans, buyers’ credit, suppliers’ credit, or securitised instruments such as floating rate notes and fixed rate bonds. ECBs are characterized by a minimum average maturity period of three years and are governed by the…
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Foreign Investments – Key Concepts
Foreign investment plays a crucial role in India’s economic growth and development. It provides capital, enhances productivity, facilitates technology transfer, and integrates India with global markets. Foreign investment primarily enters India through two major channels: Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). Additionally, other forms such as External Commercial Borrowings (ECB) and Non-Resident…
Conversion of External Commercial Borrowings (ECB) into Equity Shares
The conversion of External Commercial Borrowings (ECB) into equity is a mechanism through which a non-resident lender becomes a shareholder in an Indian company by exchanging the outstanding ECB amount for equity shares. This process is governed by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA) and is subject to…
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