**Summary:**
This circular, A.P. DIR Series Circular No. 18, issued by the Reserve Bank of India (RBI) on February 7, 2019, modifies the External Commercial Borrowings (ECB) policy to facilitate the Corporate Insolvency Resolution Process (CIRP). Specifically, it relaxes end-use restrictions on ECBs raised by resolution applicants.
Under the revised policy, resolution applicants (who are otherwise eligible borrowers) can now raise ECBs from recognized lenders (excluding overseas branches/subsidiaries of Indian banks) under the approval route to repay Rupee term loans of the target company undergoing CIRP. This is an exception to the general restriction that ECB proceeds cannot be used for repayment of domestic Rupee loans, as outlined in the A.P. DIR Series Circular No. 17, dated January 16, 2019. This relaxation was decided in consultation with the Government of India.
Resolution applicants can submit ECB proposals through their AD Category-I banks to the Foreign Exchange Department, Central Office, Mumbai of the Reserve Bank for approval. All other provisions of the existing ECB policy remain unchanged.
This circular is issued under the authority of sections 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and takes effect immediately. Banks are directed to inform their constituents and customers of these changes.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system and monetary policy.
External Commercial Borrowings: A mechanism used in India to facilitate companies to raise money from foreign sources in foreign currency.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Corporate Insolvency Resolution Process: A process for resolving the insolvency of a company in India, as outlined in the Insolvency and Bankruptcy Code.
Authorised Dealer CategoryI Banks: Banks authorized by the Reserve Bank of India to deal in foreign exchange.
Government of India: The Union Government established by the Constitution of India.
Foreign Exchange Department, Central Office, Mumbai: A department of the Reserve Bank of India located in Mumbai, Maharashtra, responsible for foreign exchange regulations.
Ajay Kumar Misra: Chief General Manager-in-Charge at Reserve Bank of India.
भारतीय �रजव र्ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2018-19/121
A.P. (DIR Series) Circular No. 18 February 07, 2019
To
All Category-I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) Policy – ECB facility for Resolution Applicants under
Corporate Insolvency Resolution Process
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to paragraph 1 of the
Statement on Developmental and Regulatory Policies of the Sixth Bi-monthly Monetary Policy
Statement for 2018-19 dated February 07, 2019.
2. In terms of paragraph 2.1.(viii) of the Annex to the A.P. (DIR Series) Circular No. 17, dated
January 16, 2019 on “External Commercial Borrowings (ECB) Policy – New ECB Framework”, ECB
proceeds cannot be utilised for repayment of domestic Rupee loans, except when the ECB is
availed from a Foreign Equity Holder as defined in the aforesaid framework.
3. On a review it has been decided, in consultation with the Government of India, to relax the
end-use restrictions for resolution applicants under the Corporate Insolvency Resolution Process
(CIRP) and allow them to raise ECBs from the recognised lenders, except the branches/ overseas
subsidiaries of Indian banks, for repayment of Rupee term loans of the target company under
the approval route. Accordingly the resolution applicants, who are otherwise eligible borrowers,
can forward such proposals to raise ECBs, through their AD bank, to Foreign Exchange
Department, Central Office, Mumbai of the Reserve Bank for approval.
4. All other provisions of the ECB policy remain unchanged. AD Category - I banks should bring
the contents of this circular to the notice of their constituents and customers. The amended ECB
policy will come into force with immediate effect.
5. The directions contained in this circular have been issued under section 10(4) and 11(2) of the
Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions
/ approvals, if any, required under any other law.
Yours faithfully
Ajay Kumar Misra
Chief General Manager-in-Charge