RBI Simplifies The Procedure For ECB From Foreign Equity Holders

Reserve Bank of India (RBI) though its recent circular has simplified the process under the External Commercial Borrowings (ECB) guidelines and provided more flexibility to Indian companies for borrowing from its foreign equity holders (FEH).

ECBs from direct foreign equity holders under the existing ECB guidelines may be acquired under either the automatic or the approval routes, as the circumstances may warrant. If the ECB was to be acquired for general corporate purposes, then it had to be considered under the approval route. Now, however, companies belonging to manufacturing, infrastructure, hotels, hospitals and software sectors may obtain ECBs for general corporate purposes (including working capital financing) from direct equity holders under the automatic route. It is pertinent to note that this does not extend to indirect equity holders.