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EXTERNAL COMMERCIAL
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BORROWING

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S.I.M.S. Ex. MBA

Mr. PRASANNA CHAVARE

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 A Paper on

TABLE OF CONTENTS
Abbreviations …………………………………………………………………………………………… 3

Overview …………………………………………………………………………………………………. 4

Forms of foreign investment ……………………………………………………………………… 4

External commercial borrowing ………………………………………………………………… 5

Guidelines for ECB ……………………………………………………………………………………. 6

Policy impact ……………………………………………………………………………………………. 8

Implications of ECB on economy ………………………………………………………………... 9

Automatic route and its various aspects …………………………………………………….. 10

Approval route and its various aspects ………………………………………………………. 13

ECB and Hedging……………………………………………………………………………………….. 19

Accounting for forex losses in ECB……………………………………………………………… 21

Investment scenario ………………………………………………………………………………….. 21

Sources of ECB …………………………………………………………………………………………... 23

Impact of ECB …………………………………………………………………………………………… 23

Market analysis ………………………………………………………………………………………… 25

ECBs over last decade ……………………………………………………………………………….. 26

ECB data …………………………………………………………………………………………………… 27

RBI data…………………………………………………………………………………………………….. 29

ECB by RIL – An example …………………………………………………………………………… 30

Concluding observation …………………………………………………………………………….. 31

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Abbreviations
SEBI – Securities and Exchange Board of India.

JV – Joint Venture

WOS – Wholly Owned Subsidiary

AD – Authorized Dealer

ADR – American Depository Receipts

GDR – Global Depository Receipts

EDR – European Depository Receipts

SDR – Singapore Depository Receipts

FCCB – Foreign Currency Commercial Borrowings

ENCB – External Non Convertible Bonds

IDR – Indian Depository Receipts

FEMA – Foreign Exchange Management Act

ADB – Asian Development Bank

LIBOR – London Inter-Bank Offered Rate

BPS – Basis Point

AFIC – Australian Foundation Investment Company

FII – Foreign Institutional Investors

FDI – Foreign Direct Investment

FERA – Foreign Exchange Regulation Act

DEA – Department of Economic Affairs

NBFC – Non Banking Financial Companies

HFC – Housing Finance Companies

FIs – Financial Intermediaries

IFC – Infrastructure Finance Companies

SME – Small and Medium sized Enterprises

CDC – Commonwealth development Corporation

NGO – Non Government Organizations

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Overview:
Sources of funds and routes of capital issues in India:

Before enactment of SEBI, the sources of capital which were practically available to Indian
companies were very limited. Equity shares, preference shares, debentures and loans were the
main sources of raising capital for Indian companies. During the SEBI regime, many new
instruments of capital market were introduced based on recommendations of Abid Hussain
Committee (1989) and Pherwani committee (1991). Different types of equity shares, preference
shares, debentures, bonds and warrants were introduced in the domestic capital market. Many
new routes of capital issues like preferential allotment, qualified institutional placement (QIP),
book-building offers, employee stock option plan (ESOP) etc. were introduced in the domestic
capital market to facilitate the use of different new sources of funds to raise capital from the
domestic market.

Indian companies were also allowed to raise funds from foreign capital market during the post
reforms period, which further increased the scope of raising funds for Indian companies. New
international sources of foreign equity like American Depository Receipts (ADR), Global
Depository Receipts (GDR), European Depository Receipts (EDR), Singapore Depository Receipts
(SDR) etc. and foreign debts like External Commercial Borrowing (ECB), Foreign Currency
Commercial Borrowing (FCCB), External Non-Convertible Bonds (ENCB), foreign currency loan
etc. were made available for Indian companies.

Thus, Indian companies have wide scope of choice among various sources of funds and routes
of capital issues to raise funds during the post-reforms period. At the same time, Indian
Depository Receipts (IDR) was made available for residents to invest abroad.

Forms of Foreign Investment in India / Abroad

Foreign External Foreign Foreign Euro Offshore Overseas

Direct Commercial Currency Institutio
Borrowings Issues Funds Venture
Exchangea nal
Investme –Automatic
ble Bonds Investor Capital
nt –Approval
Investme
nt Investment
Direct Investment by Residents
in JVs and WOSs Abroad

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As an additional source of financing and to allow companies take advantage of lesser interest
rates abroad, Indian companies are allowed to raise funds from sources outside India.

FEMA guidelines provide Indian companies to access funds from abroad by following methods,

a) External Commercial Borrowings (ECB):-

It refers to commercial loans in the form of bank loans, buyers’ credit, suppliers’ credit,
securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible,
optionally convertible or partially convertible preference shares) availed of from non-
resident lenders with a minimum average maturity of 3 years.

b) Foreign Currency Convertible Bonds (FCCBs):-

It refers to a bond issued by an Indian company expressed in foreign currency, and the
principal and interest in respect of which is payable in foreign currency.

c) Preference shares (i.e. non-convertible, optionally convertible or partially convertible) :-

These instruments are considered as debt and denominated in Rupees and rupee
interest rate will be based on the swap equivalent of LIBOR plus spread.

d) Foreign Currency Exchangeable Bond (FCEB):-

FCEB is a bond expressed in foreign currency, the principal and interest in respect of
which is payable in foreign currency, issued by an Issuing Company and subscribed to by
a person who is a resident outside India, in foreign currency and exchangeable into
equity share of another company, to be called the Offered Company, in any manner,
either wholly, or partly or on the basis of any equity related warrants attached to debt
instruments. The FCEB may be denominated in any freely convertible foreign currency.

External Commercial Borrowings:

Foreign currency borrowings raised by the Indian companies and PSUs for financing the
commercial activities, from sources outside India are called External Commercial Borrowings
(ECBs). These are commercial loans with minimum average maturity of 3 years. The ECBs
include:-

 Bank Loans
 Buyer’s Credit
 Supplier’s Credit
 Securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible,
optionally convertible or partially convertible preference shares)
 Credit from official export credit agencies
 Commercial borrowings from the private sector window of multilateral financial
institutions, such as International Finance Corporation (Washington), ADB, AFIC, etc.
 Investment by Foreign Institutional Investors (FIIs) in dedicated debt funds
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ECBs act as an additional source of funds for companies to finance its investment needs. The
Government of India permits the ECB as a source of finance for Indian companies for expansion
as well as for fresh investment.

Guidelines for ECB:

The DEA (Department of Economic Affairs), Ministry of Finance Government of India along with
Exchange Control Department of Reserve Bank of India, monitors and regulates ECB guidelines
and policies.

 ECBs cannot be used for investment in stock market or speculation in real estate.
 For infrastructure and greenfield projects, funding up to 50% through ECB is allowed. In
telecom sector too, up to 50% funding through ECBs is allowed.
 Corporate sectors can mobilize USD 750 million via automatic route, whereas service
sectors and NGOs for microfinance can mobilize USD 200 million and 10 million
respectively.
 Borrowers can use 25 percent of the ECB to repay rupee debt and the remaining 75
percent should be used for new projects.
 ECB limit for NBFC-IFCs under the automatic route is 75 percent of their owned funds,
including the outstanding ECBs.
 Balance of payment and foreign exchange reserves position are two important drivers to
decide the level of ECBs.

Objective of ECB:

 Additional source of financing.

 Benefit of corporations through cheaper loans abroad.
 Emphasizing the priority of investing in infrastructure and core sectors such as power,
telecom, railways and roads.
 Satisfy the need of capital for small and medium scale enterprises.

Benefits to borrower:

 For corporate, ECB funding helps in many ways such as paying for overseas suppliers.
 Cost of funds borrowed from external sources is cheaper at times than domestic funds.
 Borrower can diversify the investor base.
 Opens the international market for the borrower.

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The downside risk:

It is not that ECB is always beneficial to a company and the country and does not carry any risk.
The borrower can be in trouble if the position is not hedged properly and the currency
depreciates sharply, which will lead to increase in the company’s liability. Also, at the macro
level, higher level of borrowing from overseas may push the currency to appreciate, which
makes exports uncompetitive in the international market. It is also argued that access to
overseas market and cheaper credit is an advantage for bigger companies that can borrow
abroad, while smaller companies have to deal with higher cost of capital in the domestic
market. Finally, economists are worried that the dependence of the country on short-term debt
flow, including ECB, is rising to fund the current account deficit and can have negative
consequences.

ECB policy of Government:

India’s ECB policy seeks to keep an annual cap or ceiling on access to ECB, consistent with
prudent debt management. ECB policy aims at keeping maturities long, costs low and ensures
overall growth of economy.
The policy also gives priority to projects in infrastructure and core sectors such as power, oil
exploration, telecom, railways, roads and bridges, ports, industrial parks, urban infrastructure
and export sector.
Allowed companies are free to raise funds from internationally recognized sources, offers from
unrecognized sources will not be entertained.
Applicants are free to negotiate loan terms. The policy would respect institutional relationship,
if any, between borrowers and lenders.
The choice of currency of loan and the interest rate basis (floating or fixed) is generally left to
borrowers.
The choice of security to be provided to external commercial lenders will be left to borrowers.
However, where the security is in the form of guarantee from an Indian financial institution,
there should be no counter guarantee or confirmation of the guarantee by any institution
abroad.

ECB policy focuses on three aspects:

 Eligibility criteria for accessing external markets
 Total amount of borrowings to be raised and their maturity structure
 End use of the funds raised

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Policy impact:
Government of India, along with exchange control department of RBI decides the ECB policy. It
tightens or loosens the ECB norms for various reasons such as controlling capital inflow and
thus control rupee value.

Impact of tightening in ECB norms:

Capital inflow gets controlled, which in turn restricts further rupee appreciation.

Impact on various sectors:

Positive
1. Banking
a. Need for more credit in domestic market
2. IT and BPO
a. Rupee depreciation
Negative
1. Infrastructure
a. Higher borrowing cost in the domestic market

Impact on economic variables:

 Total capital flow in the economy will reduce
 Domestic credit take off will increase
 Upward pressure on the lending rate
 Rupee will depreciate vis-à-vis foreign currency
 Domestic liquidity especially the short term will reduce

Impact of easing in ECB norms:

Capital inflow is increased, which leads to rupee appreciation.

Impact on various sectors:

Positive
1. Infrastructure
a. Lower borrowing cost in the international market (near zero interest rates in
USA and Europe)
Negative
1. Banking
a. Reduced demand for loans in domestic market (needs to lower interest rates
further)
2. IT and BPO
a. Rupee appreciation

Impact on economic variables:

 Total capital flow in the economy will increase

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 Domestic credit take off will decrease

 Downward pressure on the lending rate
 Rupee will appreciate vis-à-vis foreign currency
 Domestic liquidity especially the short term will increase

Implications of ECB on economy:

 Through its controlled policy on ECB, Government of India emphasizes the use of ECB to
fund infrastructure and SME sector of economy.
 The benefit to the economy is the low cost international funds increase the cash inflow
in economy. Over the years, Indian companies are increasingly opting for low cost ECB
to reduce their cost of borrowing.
 ECB increases the external debt of the country. So it has to be matched with the
country’s foreign exchange reserve growth to maintain the solvency.
 ECB is associated with currency risk. Increased ECB will increase cash flow in economy
which in turn appreciate rupee. This is favorable for borrower. But if rupee depreciates
then the borrower will have to shell out more rupees to pay back his ECB.
 If ECBs are not controlled, there can be huge external debt causing problems for
economy.

Conversion of ECB into equity:

ECB is necessarily a loan raised for commercial activities and is different from equity. But under
certain conditions conversion of ECB into equity is permitted if following conditions are
satisfied,
(a) The activity of the company is covered under the Automatic Route for Foreign Direct
investment or Government approval for foreign equity participation has been obtained by the
company.
(b) The foreign equity holding after such conversion of debt into equity is within the sectoral
cap.
(c) Pricing of shares is as per SEBI and erstwhile CCI guidelines / regulations in the case listed /
unlisted companies as the case may be.

Routes to access ECB:

ECB in India can be accessed via two routes viz. Automatic Route and Approval Route.
General idea is that ECB for investment in industrial, infrastructure sector are allowed under
Automatic Route. They do not require the approval of the RBI or the Government of India.
For specific sectors such as export and import, the borrower has to take explicit permission of
the Government before raising ECB. This is referred to Approval Route.

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Automatic Route and its various aspects:

A. Eligible borrowers
- Corporate including hotel, hospital, software sectors (registered under the
Companies Act 1956)
- Infrastructure Finance Companies (IFCs) except financial intermediaries such as
banks, FIs, HFCs, and NBFCs are eligible to raise ECB.
- Units in SEZs are allowed to raise ECB for their captive requirements.
- NGOs engaged in micro finance activities are eligible to avail of ECB (subject to
certain conditions). Trusts and Non-Profit making organizations are not eligible to
raise ECB.

B. Recognized lenders
- ECB can be raised by borrowers from internationally recognized sources such as
(i) International banks,
(ii) International capital markets,
(iii) Multilateral financial institutions (such as IFC, ADB, CDC, etc.)/ Regional
Financial Institutions and Government owned Development Financial
Institutions,
(iv) Export Credit Agencies,
(v) Suppliers of Equipments,
(vi) Foreign Collaborators and
(vii) Foreign Equity Holders (other than erstwhile Overseas Corporate Bodies).

- Overseas organizations and individuals may provide ECB to NGOs engaged in

microfinance activities subject to complying with some safeguards outlined in the
RBI circular.

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C. Amount and Maturity

D. All-in-cost ceilings
All-in-cost includes rate of interest, other fees and expenses in foreign currency except
commitment fee, pre-payment fee, and fees payable in Indian Rupees. The payment of
withholding tax in Indian Rupees is excluded for calculating the all-in-cost.

*for the respective currency of borrowing or applicable benchmark.

LIBOR- London InterBank Offered Rate.
Bps- basis points (1 Bps = one hundredth of a percent)

E. End use
- ECBs can be raised for investment (import of capital goods as classified by DGFT in
Foreign Trade Policy (FTP)) in new projects, modernization/expansion of existing
units in industrial and service sectors including infrastructure sector.
- Overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS)
subject to the existing guidelines on Indian Direct Investment in JV/ WOS abroad.
- First stage acquisition of shares in the disinvestment process and also in the
mandatory second stage offer to the public under the Government’s disinvestment
program of PSU shares.
- NBFCs categorized as Infrastructure Financing Companies (IFC) are permitted to avail
ECBs including outstanding in existing ECBs up to 50% of their owned funds under

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Automatic Route for on lending to infrastructure sector and beyond 50% of owned
funds under Approval Route.
- For lending to self-help groups or for micro-credit or for bonafide micro finance
activity including capacity building by NGOs engaged in micro finance activities, etc.

F. Restrictions
- Utilization for on-lending or investment in capital market or acquiring a company (or
a part thereof) in India by a corporate, investment in real estate sector, for working
capital, general corporate purpose and repayment of existing Rupee loans.
- Issuance of guarantee, standby letter of credit, letter of undertaking or letter of
comfort by banks, FIs and NBFCs from India relating to ECB.
- The borrower has the option to offer security against the ECB. Creation of charge
over immoveable assets and financial securities, such as shares, in favor of the
overseas lender is subject to FEMA regulations and ECB guidelines.

G. Other provisions
- Borrowers are permitted to either park the ECB proceeds abroad or to remit these
funds to India. ECB proceeds parked in various liquid assets as per regulation can be
invested in Treasury Bills and other monetary instruments of one year maturity and
having minimum rating etc. The funds may be invested in such a way that the
investments can be liquidated as and when funds are required by the borrower in
India.
- ECB funds may also be repatriated to India for credit to the borrowers’ Rupee
accounts with banks (AD) in India, pending utilization for permissible end-uses.
- Upon compliance of minimum maturity period applicable to the loan, prepayment of
ECB up to USD 500 Mn. can be made by AD banks without prior approval of RBI.
- An existing ECB may be refinanced by raising a fresh ECB subject to the fresh one
raised is at a lower all-in-cost and the outstanding maturity of the original ECB is
maintained.
- The designated AD bank has the general permission to make remittances of
installments of principal, interest and other charges in conformity with the ECB
guidelines.

H. Procedure
Borrowers are required to enter into an agreement with recognized lender in
compliance of ECB guidelines without RBI approval and obtain a Loan Register Number
(LRN) from RBI before drawing the ECB as per the procedure laid down in the policy.

I. Guarantees
Issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort
by banks, Financial Institutions and Non-Banking Financial Companies (NBFCs) relating
to ECB is not permitted.

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J. Security
The choice of security to be provided to the lender / supplier is left to the borrower.
However, creation of charge over immovable assets and financial securities, such as
shares, in favor of the overseas lender is subject to Regulation 8 of Notification No.
FEMA 21/RB- 2000 dated May 3, 2000 and Regulation 3 of Notification No. FEMA 20/RB-
2000 dated May 3, 2000 respectively, as amended from time to time.

K. Parking of ECB proceeds overseas

ECB raised for foreign currency expenditure for permissible end-uses shall be parked
overseas and not to be remitted to India. ECB proceeds parked overseas can be invested
in the following liquid assets (a) deposits or Certificate of Deposit or other products
offered by banks rated not less than AA (-) by Standard and Poor / Fitch IBCA or Aa3 by
Moody’s; (b) deposits with overseas branch of an Authorized Dealer in India; and (c)
Treasury bills and other monetary instruments of one year maturity having minimum
rating as indicated above. The funds should be invested in such a way that the
investments can be liquidated as and when funds are required by the borrower in India.

L. Prepayment
Prepayment of ECB up to USD 500 million may be allowed by AD banks without prior
approval of RBI subject to compliance with the stipulated minimum average maturity
period as applicable to the loan.

M. Refinancing of an existing ECB

The existing ECB may be refinanced by raising a fresh ECB subject to the condition that
the fresh ECB is raised at a lower all-in-cost and the outstanding maturity of the original
ECB is maintained.

N. Debt servicing
The designated Authorized Dealer (AD bank) has the general permission to make
remittances of installments of principal, interest and other charges in conformity with
ECB guidelines issued by Government / Reserve Bank of India from time to time.

Approval Route and its various aspects:

A. Eligible borrowers
- On lending by the EXIM Bank for specific purposes (case to case basis).
- Banks and financial institutions which had participated in the textile or steel sector
restructuring package as approved by the Government.
- ECB with minimum average maturity of 5 years by NBFC to finance import of
infrastructure equipment for leasing to infrastructure projects.
- Infrastructure Finance Companies (IFCs) i.e. NBFCs, categorized as IFCs, by RBI
(beyond 50% of their owned funds) for on-lending to the infrastructure sector as
defined under the ECB policy and subject to compliance of certain stipulations.
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- Foreign Currency Convertible Bonds (FCCBs) by Housing Finance Companies.

- Special Purpose Vehicles (SPV) or any other entity notified by the RBI, set up to
finance infrastructure companies / projects exclusively.
- Financially solvent Multi-State Co-operative Societies engaged in manufacturing.
- SEZ developers for providing infrastructure facilities within SEZ.
- Eligible Corporate under automatic route other than in the services sector viz.
hotels, hospitals and software sector can avail of ECB beyond USD 750 million per
financial year.
- Corporate in the service sector for availing ECB beyond USD 200 Mn. per financial
year.
- Cases falling outside the purview of the automatic route limits and maturity
indicated, etc.

B. Recognized lenders
- ECB can be raised by borrowers from internationally recognized sources such as
(i) International banks,
(ii) International capital markets,
(iii) Multilateral financial institutions (such as IFC, ADB, CDC, etc.)/ Regional
Financial Institutions and Government owned Development Financial
Institutions,
(iv) Export Credit Agencies,
(v) Suppliers of Equipments,
(vi) Foreign Collaborators and
(vii) Foreign Equity Holders (other than erstwhile Overseas Corporate Bodies).

- Overseas organizations and individuals may provide ECB to NGOs engaged in

microfinance activities subject to complying with some safeguards outlined in
the RBI circular.

C. Amount and Maturity

- Corporate - additional amount of USD 250 million with average maturity of more
than 10 years, over and above the existing limit of USD 500, during a financial year.
Prepayment and call / put options not permitted in respect of the aforesaid
additional limit up to 10 years.
- Corporate in infrastructure sector -ECB up to USD 100 million and corporate in
industrial sector -ECB up to USD 50 million for rupee capital expenditure for
permissible end users within the overall limit of USD 500 million per borrower, per
financial year, under automatic Route.
- NGOs engaged in micro finance activities –ECB up to USD 5 million during a financial
year
- Corporate in the services sector -ECB up to USD 100 million, per borrower, per
financial year, for import of capital goods.

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D. All-in-cost ceilings
All-in-cost includes rate of interest, other fees and expenses in foreign currency except
commitment fee, pre-payment fee, and fees payable in Indian Rupees. The payment of
withholding tax in Indian Rupees is excluded for calculating the all-in-cost.

*for the respective currency of borrowing or applicable benchmark.

LIBOR- London InterBank Offered Rate
Bps- Basis points (1Bps=one hundredth of a percent)

E. End use
- ECBs can be raised for investment (import of capital goods as classified by DGFT in
Foreign Trade Policy (FTP)) in new projects, modernization/expansion of existing
units in industrial and service sectors including infrastructure sector.
- Overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS)
subject to the existing guidelines on Indian Direct Investment in JV/ WOS abroad.
- First stage acquisition of shares in the disinvestment process and also in the
mandatory second stage offer to the public under the Government’s disinvestment
program of PSU shares.
- NBFCs categorized as Infrastructure Financing Companies (IFC) are permitted to avail
ECBs including outstanding in existing ECBs up to 50% of their owned funds under
Automatic Route for on lending to infrastructure sector and beyond 50% of owned
funds under Approval Route.
- For lending to self-help groups or for micro-credit or for bonafied micro finance
activity including capacity building by NGOs engaged in micro finance activities, etc.
- The payment by eligible borrowers in the Telecom sector, for spectrum allocation
may, initially, be met out of Rupee resources by the successful bidders, to be
refinanced with a long-term ECB, under the approval route, subject to certain
conditions outlined in the circular.

F. Restrictions
- Utilization for on-lending or investment in capital market or acquiring a company (or
a part thereof) in India by a corporate, investment in real estate sector, for working
capital, general corporate purpose and repayment of existing Rupee loans.
- Issuance of guarantee, standby letter of credit, letter of undertaking or letter of
comfort by banks, FIs and NBFCs from India relating to ECB.
- The borrower has the option to offer security against the ECB. Creation of charge
over immoveable assets and financial securities, such as shares, in favor of the
overseas lender is subject to FEMA regulations and ECB guidelines.

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G. Other provisions
- Indian Infrastructure companies (as defined under the extant ECB policy) are
permitted to import capital goods by availing of short term credit (including buyers’
/ suppliers’ credit) in the nature of 'bridge finance', under the approval route,
subject to the conditions prescribed.
- Airline companies registered under the Companies Act, 1956 and possessing
scheduled operator permit license from DGCA for passenger transportation are
eligible to avail of ECB for working capital with a minimum average maturity period
of three years within the overall ceiling of USD one billion for the entire civil aviation
sector and the individual maximum permissible ceiling of USD 300 million. The
liability should be extinguished from foreign exchange earnings of the companies
only.
- Issuance of guarantee, standby letter of credit, letter of undertaking or letter of
comfort by banks, FIs and NBFCs from India relating to ECB in case of SME as also for
facilitating capacity expansion and technological up gradation in Indian Textile
industry can be considered on merit subject to prudential norms.
- The borrower has the option to offer security against the ECB. Creation of charge
over immoveable assets and financial securities, such as shares, in favor of the
overseas lender is subject to FEMA regulations and ECB guidelines.
- Borrowers are permitted to either park the ECB proceeds abroad for foreign
currency expenditure pending utilization or to remit these funds to India for rupee
expenditure pending utilization. ECB proceeds parked abroad can be utilized in
various liquid assets as per regulation, and for investment in Treasury Bills and other
monetary instruments of one year maturity and having minimum rating etc. The
funds should be invested in such a way that the investments can be liquidated as
and when funds are required by the borrower in India.
- Upon compliance of minimum maturity period applicable to the loan, prepayment of
ECB up to USD 500 Mn. can be made by AD banks without prior approval of RBI. Pre-
payment of ECB for amounts exceeding USD 500 Mn. would be considered by the
Reserve Bank under the Approval Route.
- Existing ECB may be refinanced by raising a fresh ECB subject to the condition that
the fresh ECB is raised at a lower all-in-cost and the outstanding maturity of the
original ECB is maintained.
- The designated AD bank has the general permission to make remittances of
installments of principal, interest and other charges in conformity with the ECB
guidelines.

H. Procedure
Applicants are required to submit an application in form ECB through designated AD
bank to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve
Bank of India, Central Office , Central Office , External Commercial Borrowings Division,
Mumbai – 400 001, along with necessary documents.

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I. Guarantee
Issuance of guarantee standby letter of credit, letter of undertaking or letter of comfort
by banks, financial institutions and NBFCs relating to ECB is not normally permitted
Applications for providing guarantee / standby letter of credit or letter of comfort by
banks, financial institutions relating to ECB in the case of SME will be considers on merit
subject to prudential norms. With a view to facilitating capacity expansion and
technological up gradation in Indian Textile industry issue of guarantees, standby letters
of credit, letters of undertaking and letters of comfort by banks in respect of ECB by
textile companies for modernization or expansion of textile units will be considered
under the Approval Route subject to prudential norms.

J. Security
The choice of security to be provided to the lender / supplier is left to the borrower.
However, creation of charge over immovable assets and financial securities, such as
shares, in favor of the overseas lender is subject to Regulation 8 of Notification No.
FEMA 21/RB-2000 dated May 3, 2000 and Regulation 3 of Notification No. FEMA 20/RB-
2000 dated May 3, 2000 as amended from time to time, respectively.

K. Parking of ECB proceeds overseas

ECB raised for foreign currency expenditure for permissible end- uses shall be parked
overseas and not remitted to India and ECB raised for Rupee expenditure for
permissible end- uses shall be parked overseas until actual requirement in India. ECB
proceeds parked overseas can be invested in the following liquid assets (a) deposits or
certificate of deposits or other products offered by banks rated not less than AA (-) by
Standard and Poor / Fitch IBCA or Aa3 by Moody’s; (b) deposits with overseas branch of
an AD bank in India; and (c) Treasury bills and other monetary instruments of one year
maturity having minimum rating as indicated above. The funds should be invested in
such a way that the investments can be liquidated as and when funds are required by
the borrower in India.

L. Prepayment
(a) Prepayment of ECB up to USD 500 million may be allowed by AD bank without prior
approval of Reserve Bank subject to compliance with the stipulated minimum average
maturity period as applicable to the loan.
(b) Pre-payment of ECB for amounts exceeding USD 500 million would be considered by
the Reserve Bank under the Approval route.

M. Refinancing of an existing ECB

Existing ECB may be refinanced by raising a fresh ECB subject to the condition that the
fresh ECB is raised at a lower all-in- cost and the outstanding maturity of the original ECB
is maintained.

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N. Debt servicing
The designated AD bank has general permission to make remittances of installments of
principal, interest and other charges in conformity with ECB guidelines issued by
Government / Reserve Bank of India from time to time.

Reasons for ECB’s attractiveness to:

 Lender
 ECB is for specific period which can be as short as 3 years.
 Interest and borrowed money is repatriable.

 Borrower
 Large amounts of funds can be raised.
 Easy availability of funds for large reputed borrowers.
 Diversification of lender’s base.

Why companies opt for ECB:

1. Foreign currency funds: companies need funds in foreign currencies for various
purposes such as, paying to suppliers in other countries that may not be available in
India.
2. Cheaper funds: the cost of funds borrowed from external sources at times works out to
be cheaper than cost of rupee funds.
3. Diversification of investor’s base: the other advantage is addition of more investors thus
diversifying the investor base.
4. Satisfying large requirements: the international market is a much better option in case
of large requirements, as the availability of funds huge as compared to domestic
market.

Benefits of ECBs over other sources of funds:

1. Cost of raising ECBs is much lower than that of domestic borrowings (current spread is
around 300 bps without considering cost of hedging.
2. Global financial market is a much bigger source of credit.
3. Foreign lenders provide far more flexibility in terms of providing security for ECBs.

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Disadvantages of ECB:

1. Since the funds are raised through ECBs in foreign currency and their interest and
redemption proceeds are also payable in the foreign currency, the issuing company has
to hedge its foreign exchange exposure, which involves expenditure. In case the
company opts to keep its foreign exchange exposure unhedged, it carries a huge risk to
fluctuations in foreign exchange rates.
2. RBI has also acknowledged this problem and has instructed the banks to put in place a
system for monitoring the unhedged foreign exchange exposure of small and medium
enterprises.
3. The funds raised through ECBs have to be utilized in accordance with the end uses
permitted under guidelines- as such these funds cannot be utilized for working capital
and general capital purposes.

Difference between ECB and FDI:

1. ECB means any kind of funding other than equity. If the foreign money is used to finance
the equity capital, it would be termed as FDI.
2. ECB should satisfy the ECB regulations stipulated by Government and its agencies such
as RBI.
3. Instruments included in ECB are, Bonds, Credit notes, Asset backed securities, Mortgage
backed securities etc.
4. Instruments not allowed under ECB are, any investment made towards core capital such
as equity shares, convertible preference shares, convertible debentures. Those
instruments which can be converted into equity are called as convertibles and are
covered by FDI policy.
5. Any other direct capital is not allowed in ECB.

Liability management / ECB Hedging:

 ECBs: to hedge or leave it unheadged?
This is substantially dependent on
(a) Whether you have a natural hedge in your operations and revenues; and
(b) What view would you like to take on the movements in foreign exchange over time?
Since ECBs are a long-term exposure, the long-term movement of exchanges rates tends
to kill the interest rate differentials in a pair of currencies. However, this fundamental
argument, called interest rate parity theory, is currently affected by a whole lot of
macroeconomic factors.
If you leave ECB costs unhedged, you may be taking a substantial risk on forex losses.
There is a currency risk involved in ECBs. A depreciating rupee will prove burdensome at
the time of repayment of loan. Unless you have a natural hedge, there may be periods
where this may cause a significant strain on your financials.
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 ECBs that must be fully hedged:

The forex exposure of following borrowers needs to be fully hedged:-
 ECB by NGOs engaged in micro finance activities and MFIs.
 In case of ECB availed by NBFCs categorized as IFCs, the currency risk needs to be
fully hedged.
 If IFCs has availed of credit enhancement facility and the same gets invoked,
then in case the novated loan is designated in foreign currency, the IFCs should
hedge the entire foreign currency exposure.
 ECB availed by the HFCs.
 In case of on-lending to MSME sector in INR, by SIDBI, the foreign currency risk
shall be hedged in full.
In case of other borrowers, hedging of ECB can be optional.

RBI guidelines:
ECBs denominated in INR - Hedging Facilities for Non-Resident Entities

Operational Guidelines, Terms and Conditions

 The foreign equity holder / overseas organisation or individual approaches the AD bank
in India with a request for forward cover in respect of underlying transaction for which
he needs to furnish appropriate documentation (scanned copies would be acceptable),
on a pre-deal basis to enable the AD bank in India to satisfy itself that there is an
underlying ECB transaction, and details of his overseas banker, address, etc. The
following undertakings also need to be taken from the customer –

- That the same underlying exposure has not been hedged with any other AD
Category- I bank/s in India.
- If the underlying exposure is cancelled, the customer will cancel the hedge contract
immediately.

 The amount and tenor of the hedge should not exceed that of the underlying
transaction and should be in consonance with the extant regulations regarding tenor of
payment / realization of the proceeds.
 On due date, settlement is to be done through the correspondent bank’s Vostro or the
AD bank’s Nostro accounts. AD banks in India may release funds to the beneficiaries
only after sighting funds in Nostro / Vostro accounts.
 The contracts, once cancelled, cannot be rebooked.
 The contracts may, however, be rolled over on or before maturity subject to maturity of
the underlying exposure.

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 On cancellation of the contracts, gains may be passed on to the customer subject to the
customer providing a declaration that he is not going to rebook the contract or that the
contract has been cancelled on account of cancellation of the underlying exposure.

Accounting for Forex losses in ECBs:

The Ministry of Corporate Affairs, vide Notification No. G.S.R. 225(E) dated 31st March, 2009
issued Companies (Accounting Standards) Amendment Rules, 2009 thereby inserting paragraph
46 in Accounting Standard (AS) 11 relating to “The Effects of Changes in Foreign Exchange
Rates”.
By virtue of the same,
 Exchange differences arising on reporting of long-term foreign currency monetary items
at rates different from those at which they were initially recorded during the period, or
reported in previous financial statements relating to acquisition of a depreciable capital
asset, can be added to or deducted from the cost of the asset and can be depreciated
over the balance life of the asset.
 In other cases, it can be accumulated in “Foreign Currency Monetary Item Translation
Difference Account” in the enterprise’s financial statements and amortized over the
balance period of such long-term asset/liability.
These treatments were initially allowed in respect of accounting periods commencing on or
after 7th December, 2006 and up to 31st March, 2011 and later, vide Notification No. G.S.R.
378 (E) dated 11th May, 2011 up to 31st March, 2012.
However, vide MCA Notification No. G.S.R. 913(E) dated 29th December, 2011, the above
mentioned treatment for accounting forex losses was allowed in respect of accounting periods
commencing on or after 7th December, 2006 and ending on or before 31st March, 2020.

Investment scenario:
 Major Indian companies availing ECB facility
1. Telecom companies such as Idea, Aircel, Tata Teleservices , Vodafone and Sistema
Shyam Teleservices.
2. Reliance Industries.
3. Financing companies in power sector such as Power Finance Corporation, Rural
Electrification Corporation.
4. Infrastructure companies such as Jai Prakash Associates, IVRCL and Larsen &
Toubro.

 Major arrangers for ECBs in India

1. State Bank of India
2. Punjab National Bank
3. Industrial Development Bank of India
4. Standard Chartered

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5. Citibank

 Recent major ECB deals

1. Usha Martin raised USD 125 million for a tenure of 7 years to part finance its
expansion plans with State Bank of India as the lead arranger (January ’11).
2. Power Finance Corporation raised USD 260 million for a tenure of 6 years for lending
purposes to power sector (February ’11).
3. HPCL Mittal Energy Ltd. mopped up USD 100 million for a tenure of 5 years for new
project
(February ’11).

 Future outlook
We can expect an increase in demand for ECBs amongst the Indian Companies because
of the following reasons:-
1. Plans for Huge Spending on Infrastructure project.
2. Domestic interest rates are moving upwards.

Key issues with ECB policy:

1. Domestic loan refinancing by ECBs is not available to companies in sectors such as retail,
construction, services etc.
a. Similar policy available for companies developing sea ports, airports, roads,
bridges and power
b. These sectors require cheap source of funding to remain competitive in global
markets
2. Use of ECBs for on-lending is not allowed
a. Inability of wholly owned subsidiaries (WOSs) and Special Purpose Vehicles
(SPVs) to raise cost effective debt due to lack of strong balance sheet
b. SPVs and WOSs prevalent in infrastructure sector which are capital intensive
3. Absence of full capital account convertibility and thus a cap on rupee expenditure of
ECBs.

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Sources of ECB:

Foreign Currency
Convertible Notes,
18.5%

Almost 60% of external commercial borrowings are through secured loans. Unsecured loans
form about 21% while foreign currency convertible notes form about 18% of total external
commercial borrowings.
The interest rates for secured loans are lower for secured loans than for unsecured loans,
hence they are preferred by companies to raise capital. For banks secured loans are safer and
hence prefer to unsecured loans.
FCCBs have lower interest rates than loans, however there is a threat of equity dilution if they
are converted to equity, which lowers their appeal to borrowers. Also, in the present scenario
where company stocks have been battered, the leaders would not prefer FCCBs.

Impact of ECBs on stock performance of companies:

 Bull market:
During bull markets, companies have high profits and face less difficulty in meeting their
interest obligations. Also, the rupee is stronger related to dollar, which reduces the
obligations of ECB. This fact can be seen in the stock price performance of the
companies with high ECB exposure as they outperform their respective indices by 50 %.
The outperformance was seen across the majority of the companies as 14 out of the 20
companies outperformed their respective indices.

 Bear market:
During the bear market of 2011, the rupee depreciated heavily, the impact of which was
clearly seen on the stock price performance of companies with high ECB exposure.
These companies unperformed their respective industry indices by 18%. 15 out of 20

S.I.M.S. Page 23
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companies underperformed their respective industry index. Thus the falling profits and
rupee depreciation leads to deterioration of condition of such companies with high ECB
exposure.

Impact of ECB on India’s external debt:

External debt of a country indicates the contractual liability of residents to non-residents. Post
2006, Indian’s external debt structure is undergoing a major change. The contribution of
multilateral and bilateral debt is falling, while that of ECB and NRI deposits is increasing sharply.
The changing structure indicates the Indian economy is becoming more market oriented and is
becoming integrated with world economy.
The increase in ECB gives rise to concerns in case of depreciation of rupee as it leads to a higher
debt service burden (in rupee terms) that adversely impacts the profitability and balance sheet.

Which sectors prefer ECB:

The analysis reveals that that the sectors which are performing well generally have lower ECB.
For example, AUTO and PHARMA which are laggards in 2007 bull market had ECB/ total
liabilities of 14% and 15% respectively. However, as the performance of these sectors relative
to the market improved in 2012, their ECB/total liabilities reduced to 5% and 1% respectively.
Infrastructure and power are exception to this trend. As these are the sectors where ECB is
encouraged by Government and favored through the Automatic route and at times supported
by even sovereign guarantee.
The reason for the trend is that sectors which are not performing well have to avail domestic
credit at unfavorable stringent terms and so they prefer ECBs which are available at
comparatively favorable terms.

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Market analysis:

Amount of ECB raised in year 2009 and 2010 on monthly basis:

Purpose wise distribution of ECBs raised during 2010-2011:

S.I.M.S. Page 25
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Capital raised through ECBs in last decade (in million USD):

ECBs over a decade

25000

20000

15000
USD million

10000

5000

-5000
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-
01 02 03 04 05 06 07 08 09 10
Series1 4303 -1585 -1692 -2925 5194 2508 16103 22609 7941 2522

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ECBs raised in the month of Dec, 2014:

Data on ECB for the month of December 2014

I AUTOMATIC ROUTE*
Borrower Amount, Purpose Maturity Period
USD (Appx)
Kusakabe India Private Limited 820,000 Working Capital 11 Years 8
1
Months
Kusakabe India Private Limited 1,180,000 Modernisation 10 Years 7
2
Months
3 Azure Clean Energy Private Limited # 13,720,460 Rupee Expenditure Loc.CG 15 Years
4 Pranita Engineering Solutions Private Limited 2,212,300 Import of Capital Goods 5 Years 1 Month
5 Kronos Solutions India Private Limited 3,439,619 Modernisation 3 Years
6 3D Technopack Limited 600,000 Modernisation 3 Years
7 Knorr-Bremse Technology Center India Private Limited 493,076 Rupee Expenditure Loc.CG 5 Years 8 Months
Knorr-Bremse Technology Center India Private Limited 493,076 Rupee Expenditure Loc.CG
8
5 Years 8 Months
9 Goldman Sachs Services Private Limited # 75,000,000 General Corporate Purpose 7 Years 4 Months
10 Phoenix Mecano (India) Private Limited 1,900,000 Modernisation 4 Years 1 Month
11 Enexco Teknologies India Limited 3,824,518 General Corporate Purpose 7 Years 1 Month
Jaeger Products Private Limited 750,000 General Corporate Purpose 12 Years 10
12
Months
13 Mangalore Chemicals & Fertilizers Limited 3,422,078 Import of Capital Goods 8 Years 2 Months
14 Orotex Chemicals India Private Limited 600,000 General Corporate Purpose 7 Years 1 Month
15 Aptar Beauty & Home India Private Limited 4,780,648 Import of Capital Goods 3 Years 2 Months
16 Sicor Engineering India Private Limited 184,904 Rupee Expenditure Loc.CG 3 Years 3 Months
17 Takata India Private Limited 4,930,760 Import of Capital Goods 5 Years
18 Lanxess India Private Limited 2,390,324 Rupee Expenditure Loc.CG 5 Years 1 Month
19 Ferring Therapeutics Private Limited 5,625,229 New Project 7 Years 2 Months
20 Hirohama India Private Limited 419,103 New Project 12 Years 1 Month
Plansee India High Performance Materials Private Limited 2,465,380 Modernisation 3 Years 11
21
Months
22 Decal IN Italian Graphics Industry Private Limited 184,904 Import of Capital Goods 5 Years 4 Months
23 Grupo Cosmos India Private Limited 1,479,228 Import of Capital Goods 5 Years 3 Months
Luk India Private Limited # 3,500,000 Rupee Expenditure Loc.CG 5 Years 10
24
Months
25 Emami Paper Mills Limited 10,000,000 Modernisation 8 Years 1 Month
Scapa Tapes India Private Limited 700,000 General Corporate Purpose 13 Years 4
26
Months
27 Shakti Hormann Private Limited 1,047,787 Modernisation 8 Years 1 Month
28 Kalyani Steels Limited 10,770,000 Modernisation 5 Years
29 Tsugami Precision Engineering India Private Limited 2,549,679 Working Capital 7 Years 1 Month
30 Amneal Life Sciences Private Limited 8,200,000 Refinancing of Earlier ECB 5 Years 4 Months
31 Sabmiller India Ltd # 50,000,000 General Corporate Purpose 7 Years 7 Months
32 Sakura Autoparts India Private Limited 1,500,000 New Project 6 Years 7 Months
33 Switchgear and Control Technics Private Limited 400,000 General Corporate Purpose 9 Years 1 Month
34 Emcure Pharmaceuticals Limited 8,000,000 Import of Capital Goods 5 Years
35 Wohr Parking Systems Private Limited # 485,680 Import of Capital Goods 4 Years 8 Months
36 Indo Autotech Limited 3,081,725 Modernisation 5 Years
37 Saurer Textile Solutions Private Limited 7,334,506 New Project 9 Years 3 Months

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38 Parixit Industries Limited 3,698,070 Working Capital 9 Years 7 Months

39 Gokul Super Speciality Hospital Private Limited 4,500,000 New Project 8 Years 4 Months
40 Nippon Carbide India Private Limited 478,065 General Corporate Purpose 7 Years 1 Month
41 NTN NEI Manufacturing India Private Limited 6,600,000 Import of Capital Goods 3 Years 2 Months
Tensil Labglass Technologies Private Limited 215,721 Import of Capital Goods 4 Years 10
42
Months
43 Marquardt India Private Limited 770,431 Modernisation 8 Years 1 Month
Kern-Liebers Springs & Stampings Private Limited 4,037,060 Import of Capital Goods 9 Years 10
44
Months
45 Parker PCP Auto Components Private Limited 670,566 Import of Capital Goods 5 Years 1 Month
46 Neemrana Steel Service Center India Private Limited 2,500,000 Modernisation 7 Years 1 Month
47 Metzeler Automotive Profiles India Pvt Ltd 4,780,648 Modernisation 6 Years 7 Months
48 Dorf Ketal Speciality Catalyst Private Limited # 6,000,000 Rupee Expenditure Loc.CG 5 Years
49 Concord Biotech Limited 5,000,000 Rupee Expenditure Loc.CG 5 Years
MBL Infrastructures Limited 9,000,000 Rupee Expenditure Loc.CG 6 Years 10
50
Months
51 Prodair Air Products India Private Limited # 47,806,479 New Project 6 Years 3 Months
Himatsingka Seida Limited 21,000,000 Overseas Acquisition 6 Years 10
52
Months
53 Auxel FTG India Private Limited 493,076 Working Capital 8 Years 4 Months
54 Auxel FTG India Private Limited 739,614 Rupee Expenditure Loc.CG 6 Years 4 Months
55 Toyoda Gosei Minda India Private Limited 2,390,324 Modernisation 5 Years
56 OIL India Limited # 125,000,000 Refinancing of Earlier ECB 5 Years 6 Months
57 Aquapharm Chemicals Private Limited 2,157,208 Modernisation 5 Years 4 Months
58 ATC Tires Private Limited 5,000,000 New Project 6 Years 3 Months
59 GBM Networks Asia Private Limited 350,000 New Project 6 Years 9 Months
Automatic Route Total 491,672,245

Approval Route
1 Q-Das Software Private Limited 118,338 General Corporate Purpose 8 Years 1 Month
2 Air India Limited 99,500,000 Import of Capital Goods 1 Year
Sandisk India Device Design Centre Private Limited 28,000,000 17 Years 2
3
Modernisation Months
4 Mercator Limited 18,000,000 Modernisation 6 Years 7 Months
Approval Route Total 145,618,338
Grand Total 637,290,584

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India’s ECB data : A report by Ministry of Finanace:

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$1.75 bn raised by RIL via ECB route at 145-165 bps to LIBOR:

Mumbai: Reliance Industries Ltd (RIL) has received commitment from 19 underwriting banks to
raise $1.75 billion equivalent in multi-currency loans, mostly to refinance its existing
borrowings.
The syndicated loan, external commercial borrowing (ECB) in nature, will be raised in two
tranches—$1.2 billion for five years in US dollar, euro, Japanese yen and Singapore dollar to
refinance the firm’s existing multi-currency facilities; and $550 million in US dollar for seven
years to expand its Indian refining and petrochemical business.
“This has set up some sort of new benchmark as far as ECB loans for Indian companies are
concerned,” said Atul Sodhi, managing director and head at global loan syndication group, Asia-
Pacific, at Credit Agricole Corporate and Investment Bank, one of the underwriters of the loan
facility. The underwriting banks were from all parts of the globe and the loans are expected to
be fully subscribed once they are launched in the market. This could be good news for Indian
companies trying to raise funds abroad. Costs of funds for Indian companies have risen after
the US Federal Reserve said in May that it may soon stop its easy money policy. The Indian
rupee hit a record low of 64.63 a dollar on Wednesday as foreign investors liquidated their
investments in India. India’s own sovereign rating is potentially under threat of being revised
down as the current account deficit ballooned to a record 4.8% in fiscal 2013 and growth
slowed to a decade low of 5%. A rating downgrade will make international loans costlier for
Indian companies. The rupee’s loss has also affected some companies who in the past had
taken loans from the overseas market and can’t repay now. “Given the recent news flows
coming out of India, this loan syndication is a very good benchmark and development for Indian
corporate. This would encourage them to approach global markets and investors with renewed
confidence,” said Sodhi.
RIL has been promised by the underwriters to raise $1.2 billion equivalent loan at London
interbank offered rate (Libor) plus 1.15% in US dollar, Libor-equivalent plus 1.25% in euro,
Libor-equivalent plus 0.95% in yen and Libor-equivalent plus 1.25% for loans in Singapore
dollar. The $550 million tranche will be raised at Libor plus 1.63%. Libor is an international
benchmark rate. One-year Libor is now at 0.66%.
The underwriters include Bank of America NA, Barclays Bank Plc, The Bank of Tokyo-Mitsubishi
UFJ Ltd, BNP Paribas, Citigroup Global Markets Asia Ltd, Crédit Agricole, DBS Bank Ltd,
Hongkong and Shanghai Banking Corp. Ltd, among others.

First Published: Wed, Aug 21 2013. 11 27 PM IST

Read more at: http://www.livemint.com/Companies/BdVdKQilBMkUNZiD5kYzBI/RIL-receives-

commitment-for-175-billion-ECB.html?utm

S.I.M.S. Page 30
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Concluding observations:

 The ECBs refer to commercial loans (in the form of bank loans, buyer’s credit, supplier’s
credit, securitized instruments as floating rates notes and fixed interest rate bonds)
availed from non-resident lenders. The policy for ECBs is also applicable to FCCBs. They
can be accessed through two routes: automatic and approval.
 The ECBs for investments in real sector-industries and especially infrastructure do not
require Government/RBI approval. Only corporate, other financial intermediaries and
NGOs engaged in micro-finance are eligible borrowers of ECBs/FCCBs. The lenders can
be only recognized sources such as international banks/capital markets, multilateral
financial institutions, export credit agencies, suppliers of equipment, foreign
collaborators and foreign equity holders. Overseas organization/individuals may provide
ECB to NGOs on the basis of a due diligence certificate. The maturity of ECBs may range
between 3-7 years. The minimum and maximum amount of ECB for a corporate (NGO)
would be USD 20 million and 500 million respectively. The ceilings on all-in costs over 6
month LIBOR currently valid are 300 bps for average maturity period of 3-5 years and
350 bps for more than 5 years. It is 500 bps for average maturity of 7 years. The ECBs
cannot be used for on-lending/investment in capital market/acquiring a company, in
real estate: and for working capital/general corporate purpose/repayment of existing
rupee loans. They can be used for investment in industrial and infrastructure sector,
overseas direct investment on JVs/WOSs and acquisition of shares in disinvestment
process of PSUs. Until their actual requirement in India, ECB proceeds should be parked
outside in liquid assets. Refinancing of existing ECBs by fresh ECBs at lower cost is
permitted. Prepayment of ECBs up to USD 200 million is also permitted.
 The approval route of ECBs is applicable to financial institutions/banks/cases falling
outside the automatic route limits and maturity period/ ECBs by NBFCs with minimum
average maturity of 5 years/ FCCBs by housing finance companies. All the stipulations
applicable to ECBs under the automatic route are also applicable to ECBs under the
approval route.

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