RBI in its circular dated January 16, 2019 advised that ECS framework for both in foreign currency and Indian Rupee has been consolidated and the Revised Regulation FEMA 3 R/2018 has been notified by the Government of India on December 17, 2018.
Accordingly, vide A. P. (DIR Series) Circular on the new ECB policy has been issued by RBI incorporating the new framework. The major liberalisation/rationalisation in the new framework is as under:
- Tracks I and II under the existing framework are merged as “Foreign Currency denominated ECB” and Track III and Rupee Denominated Bonds framework are combined as “Rupee Denominated ECB” to replace the current four-tiered structure. The framework is instrument-neutral.
- The minimum average maturity period (MAMP) has been kept at 3 years for all ECBs, irrespective of the amount of borrowing in lieu of various layers of MAMPs as at present, except the borrowers specifically permitted in the circular to borrow for a shorter period.
- All eligible borrowers can now raise ECBs up to USD 750 million or equivalent per financial year under the automatic route replacing the existing sector wise limits.
Under the new frame work list of eligible borrower has been expanded and all entities who receive foreign direct investment can borrow under ECB. Further, any entity who is a resident of a country which is FATF or IOSCO compliant will be treated as a recognised lender. The change in conditions for ECB lenders is expected to increase the number of new lenders in ECB space.