The corporates by and large procure funding through equity, debt or a combination of both. The External Commercial Borrowing (“ECB”) deals with the debt branch of the funding wherein the corporates obtain funding from foreign body corporates. The primary reason attributable for undertaking ECB funding is associated to factors such as lower rate of interest on returns, less regulatory compliances etc.
The Reserve Bank of India (“RBI”) vide its notification dated December 12, 20181 , liberalized the norms pertaining to external commercial borrowing and notified Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (“ Amended ECB Regulations”). Since these Amended ECB Regulations did not provide complete procedure for undertaking the ECB transaction therefore most of the provisions contained in the Amended ECB Regulations referred for framework which the RBI is required to frame in consultation with and Indian Government and accordingly, RBI vide master circular dated January 16, 20192 (“Master Circular”) revamped, the procedure for undertaking ECB transaction and, compliance requirements concerning ECB transactions.
Significant Changes in ECB Regime introduced through the Master Circular