\n4. <\/strong><\/td>\n| Recognized Lenders<\/td>\n | The lender must be a resident of a jurisdiction that is a member of the Financial Action Task Force (FATF) or the International Organization of Securities Commissions (IOSCO), including when transferring ECB. However,<\/p>\n a)\u00a0\u00a0\u00a0\u00a0\u00a0 Multilateral Financial Institutions (such as the IMF and the World Bank) and Regional Financial Institutions (such as the Asian Development Bank and the European Investment Bank) of which India is a member shall also be treated as recognised lenders.<\/p>\n b)\u00a0\u00a0\u00a0\u00a0\u00a0 b) Individuals as lenders are only authorised if they are foreign equity investors or subscribe to bonds\/debentures listed in another country; and<\/p>\n c)\u00a0\u00a0\u00a0\u00a0\u00a0 Foreign branches\/subsidiaries of Indian banks are only authorised as FCY ECB recognised lenders (except FCCBs and FCEBs). Subject to relevant prudential standards, foreign branches\/subsidiaries of Indian banks can act as arrangers\/underwriters\/market-makers\/traders for Rupee Denominated Bonds issued overseas.<\/p>\n Underwriting by overseas branches\/subsidiaries of Indian banks for issuances by Indian banks, on the other hand, will be prohibited.<\/td>\n<\/tr>\n | \n5.<\/strong><\/td>\n| Minimum Average Maturity Period (MAMP)<\/td>\n | a)\u00a0\u00a0\u00a0\u00a0\u00a0 The ECB’s MAMP will be three years.<\/p>\n b)\u00a0\u00a0\u00a0\u00a0\u00a0 Call and put options, if any, shall be ineligible for exercise prior to the fulfilment of the minimum average maturity.<\/p>\n c)\u00a0\u00a0\u00a0\u00a0\u00a0 c) However, for the specific categories listed below, the MAMP shall be as follows:<\/p>\n \n\n\nSr. No.<\/strong><\/td>\nCategory<\/strong><\/td>\nMAMP<\/strong><\/td>\n<\/tr>\n\n| 1.<\/td>\n | Manufacturing enterprises can raise up to USD 50 million or its equivalent in ECB every fiscal year.<\/td>\n | 1 Years<\/td>\n<\/tr>\n | \n| 2.<\/td>\n | ECB obtained from a foreign equity investor for operating capital, general company operations, or repayment of Rupee loans<\/td>\n | 5 Years<\/td>\n<\/tr>\n | \n| 3.<\/td>\n | ECB raised for:<\/p>\n (i) Working capital or general corporate purposes<\/p>\n (ii) NBFC on-lending for working capital or general corporate purposes<\/td>\n | 10 Years<\/td>\n<\/tr>\n | \n| 4.<\/td>\n | The ECB was created to:<\/p>\n (i)\u00a0repay rupee loans obtained domestically for capital expenditure; and<\/p>\n (ii) on-lending by NBFCs for the same reason.<\/td>\n | 7 Years<\/td>\n<\/tr>\n | \n| 5.<\/td>\n | ECB is being raised for the following objectives:<\/p>\n (i)\u00a0repayment of rupee loans obtained domestically for purposes other than capital expenditure; and<\/p>\n (ii) on-lending by NBFCs<\/a> for the same purpose.<\/td>\n | 10 Years<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n for the categories listed in (b) to (e) above \u2013<\/p>\n (i)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 ECB cannot be issued by overseas branches or subsidiaries of Indian banks.<\/p>\n (ii)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (ii) The required MAMP must be scrupulously followed in all situations.<\/td>\n<\/tr>\n | \n6. <\/strong><\/td>\n| All-in-Cost Ceiling per annum Other Costs<\/td>\n | The benchmark rate plus a spread of 450 basis points.<\/p>\n Prepayment charges\/penal interest, if applicable, for default or breach of covenants shall not exceed 2% over the negotiated rate of interest on the outstanding principal amount and will fall outside of the all-in-cost cap.<\/td>\n<\/tr>\n | \n7.<\/strong><\/td>\n| End-uses (Negative list)<\/td>\n | The following would be on the negative list, for which the ECB revenues could not be used:<\/p>\n a)\u00a0\u00a0\u00a0\u00a0\u00a0 Real estate transactions<\/p>\n b)\u00a0\u00a0\u00a0\u00a0\u00a0 Capital market investment<\/p>\n c)\u00a0\u00a0\u00a0\u00a0\u00a0 Capital investment<\/p>\n d)\u00a0\u00a0\u00a0\u00a0\u00a0 Working capital reasons, with the exception of the ECB indicated in 5(b) and 5(c) above.<\/p>\n e)\u00a0\u00a0\u00a0\u00a0\u00a0 General corporate objectives, with the exception of the ECB stated in 5(b) and 5(c) above.<\/p>\n f)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Repayment of Rupee loans, with the exception of the ECB stated in 5(d) and 5(e) above.<\/p>\n g)\u00a0\u00a0\u00a0\u00a0\u00a0 On-lending to entities for the aforementioned activities, with the exception of ECB raised by NBFCs as described in 5(c), 5(d), and 5(e) above.<\/td>\n<\/tr>\n | \n8. <\/strong><\/td>\n| Rate of Exchange<\/td>\n | Currency conversion of the FCY ECB into the INR ECB<\/u><\/p>\n FCY ECB into INR ECB can be at the exchange rate existing on the day of the agreement for such change between the parties involved, or at a rate less than the rate prevailing on the date of the agreement, if the ECB lender agrees.<\/td>\n | To convert to Rupees<\/u><\/p>\n The exchange rate applicable on the day of settlement shall be the rate in effect at the time of settlement.<\/td>\n<\/tr>\n | \n9.<\/strong><\/td>\n| Provision for Hedging<\/td>\n | In the case of foreign currency exposure, firms raising ECB are expected to follow the hedging rules established by the relevant sectoral or prudential authority. Companies in the infrastructure space:<\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 They must have a risk management policy that has been approved by the Board.<\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Furthermore, such corporations are required to hedge 70% of their ECB exposure if the average maturity of the ECB is less than 5 years.<\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The designated AD Category-I bank must ensure that the 70% hedging requirement is met during the ECB’s currency and report the situation to the RBI using Form ECB 2.<\/p>\n The following operational components of hedging must be ensured:<\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Coverage:<\/strong> The ECB borrower will be expected to use financial hedges to cover both the principal and the coupon. The financial hedging for all ECB exposures should begin at the moment of each such exposure (i.e. the day the liability is created in the books of the borrower).<\/p>\n\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Tenor and rollover:<\/strong> A minimum tenor of one year would be necessary for the financial hedge, with periodic rollover, ensuring that the exposure on account of the ECB is not unhedged at any moment during the currency of the ECB.<\/p>\n\u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Natural Hedge:<\/strong> Natural hedging shall be accepted in place of financial hedge solely to the extent of balancing planned cash flows \/ revenues in matching currency, net of any other projected outflows. An ECB may be regarded naturally hedged for this purpose if the offsetting exposure matures\/cash flows during the same accounting year.<\/td>\n| \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Overseas investors can hedge their Rupee risk using approved derivative instruments with AD Category I banks in India.<\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Investors can also gain access to the domestic market through branches \/ subsidiaries of Indian banks overseas or branches of foreign banks with a back-to-back presence in India.<\/td>\n<\/tr>\n | \n10.<\/strong><\/td>\n| Change in borrowing currency<\/td>\n | The ECB may freely change its currency from one freely convertible foreign currency to another freely convertible foreign currency as well as to INR.<\/td>\n | It is not permissible to exchange INR for any freely convertible foreign currency.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n | | | | | | | | | | | | |
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