GreenVissage helps in arranging ECBs from overseas branches of Indian banks or foreign banks
We aim to help
the entrepreneurs at every legal
and regulatory step.
External commercial borrowing is a loan obtained by an Indian entity (eligible borrower) from a non-resident entity (eligible lender). Such loan should confirm the parameters such as minimum average maturity, permitted end-use, all-in-cost ceiling etc. The loan should meet all the parameters in totality and not on standalone basis. The ECB Compliance has been divided into different frameworks based on the type of borrower, average maturity and currency. This again has impact on its all-in-cost ceiling and end use, which we will see in detail now. ECB Compliance is typically governed by the Master Director issued by Reserve Bank of India (RBI) as updated time to time.
Due to lesser cost of funds from external sources ECB is an attractive way of obtaining funds. Indian companies can usually borrow at lower rates from outside India as interest rates are lower there compared to the home country, India.
ECB is just a form of a loan and may not be of equity nature or convertible to equity. Hence, it does not dilute stake in the company and can be done without giving away control because debtors do not enjoy voting rights.
Once it is identified that the Company will be obtaining ECB in order to funds the business requirement, we can help you in preparing the necessary agreement along with Form 83 for obtaining LRN from RBI
Filing of the monthly return is very important in a timely manner. ECB II has to be submitted within 7 working days from the end of each month. This return consist all the information and utilisation details related to ECB for preceding month.
There are various instances that require changes in the existing terms of ECB such as change in currency, change in repayment schedule, change in purpose of ECB etc, we can assist in preparation and submission of amended Form 83 along with necessary documents.
Can ECB be obtained directly from any entity outside India?
No, ECB cannot be obtained directly from any entity outside India. Both the entities lender and borrower have to be eligible as per the Master Direction issued by RBI.
What is time limit for submitting ECB II?
Within 7 working days at the end of each month reporting the transaction of the month.
Whether ECB can be obtained in INR?
Yes, but once ECB is obtained in INR the currency cannot be changed to any other foreign currency. But an ECB obtained in Foreign currency can be changed into INR.
Whether ECB is allowed for any purpose?
No, the purpose or the end-use of ECB depends on the type of lender and maturity period. Accordingly before deciding to borrow ECB one has to first check all the details under which ECB is being obtained.
How the filing of ECB application and ECB II return is done?
All the filings related to ECB is done through Authorised Dealer Bank.
Whether allotment of LRN is considered as approval?
No, LRN is allotted by the static department of RBI, hence it should not be considered as approval. The ECB application is further subject to review based on the terms and conditions details provided n the application.