Overview Of The External Commercial Borrowings Regulatory Framework In India

External Commercial Borrowings ("ECB's) are commercial loans raised by eligible resident entities solely for commercial purposes, from recognised non-resident entities. The Reserve Bank of India ("RBI") has over the years substantially relaxed the ECB Regulatory Framework. These changes have removed a majority of restrictions on eligible borrowers and lenders in addition to clearly establishing end-use restrictions, minimum average maturity rate etc. There are several benefits to availing ECB, such as lower interest rates and greater access to global markets and opportunities. ECB provides a route to borrow large amounts in foreign currencies without necessarily having to give up control thereby keeping the company's stakes undiluted. It is the primary responsibility of the borrower to ensure compliance with the applicable ECB guidelines. Any contraventions of the applicable guidelines will attract penalties or adjudication under the Foreign Exchange Management Act,