RBI vide RBI/2012-13/201 A.P. (DIR Series) Circular No. 27 dated 11 September, 2012 on a review has decided to allow refinancing of bridge finance (if in the nature of buyers’/suppliers’ credit), with an ECB under the automatic route subject to the following conditions:-
- The buyers’/suppliers’ credit is refinanced through an ECB before the maximum permissible period of trade credit;
- The AD evidences the import of capital goods by verifying the Bill of Entry;
- the buyers’/suppliers’ credit availed of is compliant with the extant guidelines on trade credit and the goods imported conform to the DGFT policy on imports; and
- The proposed ECB is compliant with all the other extant guidelines relating to availment of ECB.
RBI clarified that, the borrowers should approach the Reserve Bank under the approval route only at the time of availing of bridge finance which will be examined subject to the following conditions:
- the bridge finance shall be replaced with a long term ECB;
- the long term ECB shall comply with all the extant ECB norms;
RBI further clarified that, the designated AD - Category I bank shall monitor the end-use of funds and banks in India will not be permitted to provide any form of guarantees for the ECB. All other conditions of ECB, such as eligible borrower, recognized lender, all- in-cost, average maturity, end-use, maximum permissible ECB per financial year under the automatic route, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged and should be complied with.