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What is ECB & how to get it?
ECB is external commercial borrowing. ECB is the cheapest form of Loan made available by foreign collaborator or foreign bank or foreign entity to Indian business. ECB is governed by RBI/ FEMA regulations. Currently majority of ECB options are under automatic route & required lesser & post transaction compliances. ECB is flexible form of foreign loan. Tenure, moratorium, loan amount, repayment schedule, interest could be flexibly agreed between foreign lender & Indian borrower.
ECB could be taken for various purposes including project, fulfilling general working capital requirements etc. ECB is usually not permitted for further lending or investment or infrastructure activities.
ECB if compared with Equity Contribution and has a mandatory loan repayment & interest payment requirement. Repayment before average maturity period is not allowed. Revision of instalment payments & conversion of ECB is permitted. Under RBI approval route, flexibility in standard conditions is allowed.
Eligibility of Lender & Borrower needs to be ascertained before initiating ECB activity.
For Company or LLP resolution for borrowing is to be passed. Proper structuring & drafting of loan agreement is essential after analyzing the requirements of the parties.
Borrower is required to obtain loan registration number (LRN) from RBI before drawing down the ECB in its bank account. ECB transaction require periodical return submission compliances to RBI till its final repayment. Monthly monitoring & reporting of utilization of proceeds of ECB is the duty of the lender.
For achieving 100% success in structuring & management of ECB transaction & for hassle-free compliances, connect to our Biz Smart Executive