Under FEMA & RBI ECB Framework

✅ ECB Under the Automatic Route

1. Identify Borrower and Lender Eligibility

• Ensure both the borrower and the lender are eligible as per RBI’s ECB Master Direction.

2. Confirm ECB Limits

• ECB amount must not exceed USD 750 million (or equivalent) per financial year per borrower.

3. Comply with Maturity Period Requirements

Minimum Average Maturity Period (MAMP) based on ECB usage:

• 1 year – For ECB raised by manufacturing companies for working capital or general corporate purposes.
• 3 years – For general purposes.
• 5 years – For ECB used in tangible or greenfield infrastructure projects.

4. Monitor End-Use Restrictions

ECB proceeds cannot be used for:

• Investment in real estate or land (except for infrastructure projects).
• Investment in capital markets or equity shares.
• On-lending for prohibited activities.

5. Maintain Cost Compliance

• Ensure the all-in-cost (interest + fees + expenses) does not exceed the RBI limit (e.g., benchmark rate + 450 basis points for foreign currency ECB).

6. Adhere to Debt-Equity Ratio

• If the lender is a foreign equity holder, the ECB liability-equity ratio must not exceed 7:1, unless the total ECB amount is less than USD 5 million.

7. Execute Loan Agreement

• Finalize and sign the loan agreement with the foreign lender.

8. Obtain Loan Registration Number (LRN)

• Submit Form ECB, certified by a Chartered Accountant (CA) or Company Secretary (CS), to the Authorised Dealer (AD) Bank.
• RBI will issue an LRN — borrowing cannot begin before the LRN is received.

9. File ECB Monthly Returns

• File Form ECB-2 return monthly via the AD Bank by the 7th of the following month, certified by CA/CS.

10. Park ECB Proceeds (if not immediately used)

• ECB proceeds may be:
  • Parked abroad in foreign currency, or
  • Repatriated to India and kept in an unencumbered INR account.

11. Report Changes in ECB Parameters

• Report any changes in ECB terms (e.g., tenure, interest, repayment) using revised Form ECB within 7 working days.

12. Pay Late Submission Fee (LSF), if applicable

• If there’s a delay in reporting (e.g., LRN or ECB-2), pay the RBI’s Late Submission Fee to regularize it.

13. Ongoing Monitoring by AD Bank

• Coordinate with the AD Category-I Bank to ensure ongoing compliance and resolve RBI queries.

14. Maintain Comprehensive Records

• Keep all documentation (loan agreements, approvals, returns, communications) for audit and RBI inspections.

📝 ECB Under the Approval Route

1. Prepare Proposal & Compile Documents

Prepare a comprehensive proposal including:

• Organizational structure with subsidiaries (if any).
• Background and transaction details.
• Loan agreement.
• Eligibility checks on borrower, lender, MAMP, cost, limits, and end-use.
• Justification for seeking approval.
• Duly filled Form ECB.
• Board Resolution or equivalent authorization.
• Any additional documents (indexed and numbered).

2. Submit Application to AD Bank

• Submit the application and documents to the AD Category-I Bank.

3. RBI Approval Process

• AD Bank forwards the application to:
  The Director, External Commercial Borrowings Division
  Department of Statistics & Information Management
  Reserve Bank of India, Bandra Kurla Complex, Mumbai – 400051.

4. Generation of LRN

• After approval, RBI issues the Loan Registration Number (LRN).
• No disbursement is allowed before LRN is received.

5. File ECB Monthly Returns

• Continue filing ECB-2 returns monthly via the AD Bank, certified by CA/CS.

6. Park ECB Proceeds (if not immediately used)

• ECB funds can be parked either abroad or in a non-interest-bearing INR account in India.

7. Report Changes in ECB Parameters

• File revised Form ECB within 7 working days if there are any changes in the ECB terms.

8. Pay Late Submission Fee (LSF), if applicable

• If there’s any delay in compliance or reporting, pay LSF to RBI to regularize.

9. Ongoing Monitoring by AD Bank

• Regularly communicate with the AD Bank to ensure compliance and timely responses to RBI.

10. Maintain Comprehensive Records

• Keep all related documents and communications for RBI review or audit purposes.