**Summary:**
This circular, issued by the Reserve Bank of India (RBI) on April 7, 2021 (A.P. DIR Series Circular No. 01), announces a one-time relaxation in the External Commercial Borrowings (ECB) policy regarding the parking of unutilized ECB proceeds in term deposits. The circular addresses all Category-I Authorized Dealer (AD Category-I) banks.
Specifically, the circular amends paragraph 4.2 of Master Direction No. 5 dated March 26, 2019, which previously stipulated that ECB borrowers could park ECB proceeds in term deposits with AD Category-I banks in India for a maximum cumulative period of 12 months.
In response to requests from stakeholders, including industry associations, and to provide relief to ECB borrowers affected by the COVID-19 pandemic, the RBI has decided to allow unutilized ECB proceeds drawn down on or before March 1, 2020, to be parked in term deposits with AD Category-I banks in India for an additional period up to March 1, 2022. This relaxation is a one-time measure.
All other provisions of the ECB policy, as outlined in Master Direction No. 5, remain unchanged. The circular directs AD Category-I banks to inform their customers of these changes.
The Master Direction No. 5 dated March 26, 2019 is being updated to reflect these changes. The directions are issued under sections 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to other applicable laws.
Ajay Kumar Misra, Chief General Manager-in-Charge, issued the circular. For further information, AD Category-I banks should refer to the circular on the RBI website (www.rbi.org.in).
Key Entities Referenced
Reserve Bank of India: The central bank of India, the primary regulator in this context.
External Commercial Borrowings: A type of loan raised by eligible resident entities from recognized non-resident entities.
Authorised Dealer Category-I Banks: Banks authorized by the Reserve Bank of India to deal in foreign exchange.
Master Direction No. 5 dated March 26, 2019: A comprehensive directive issued by the Reserve Bank of India concerning External Commercial Borrowings, Trade Credits and Structured Obligations.
Covid-19 pandemic: The global health crisis that prompted the relaxation of ECB parking rules.
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.
Ajay Kumar Misra: Chief General Manager-in-Charge at Reserve Bank of India
India: The country where the ECB proceeds are parked in term deposits with AD Category-I banks.
भारतीय �रजव र् ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2021-22/16
A.P. (DIR Series) Circular No. 01 April 07, 2021
To
All Category-I Authorised Dealer Banks
Madam / Sir,
External Commercial Borrowings (ECB) Policy – Relaxation in the period of
parking of unutilised ECB proceeds in term deposits
Please refer to paragraph 12 of the Governor’s Statement on Developmental and
Regulatory Policies dated April 07, 2021. In this connection, attention of Authorized
Dealer Category-I (AD Category-I) banks is invited to paragraph 4.2 of the of Master
Direction No.5 dated March 26, 2019, on “External Commercial Borrowings, Trade
Credits and Structured Obligations”, in terms of which ECB borrowers are allowed to
park ECB proceeds in term deposits with AD Category-I banks in India for a maximum
period of 12 months cumulatively.
2. Based on requests from stakeholders, including Industry associations, and with a
view to providing relief to the ECB borrowers affected by the Covid-19 pandemic, it
has been decided to relax the above stipulation as a one-time measure. Accordingly,
unutilised ECB proceeds drawn down on or before March 01, 2020 can be parked in
term deposits with AD Category-I banks in India prospectively for an additional period
up to March 01, 2022.
3. 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/ customers.
4. The aforesaid Master Direction No. 5 dated March 26, 2019, is being updated to
reflect the changes.
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