External Commercial Borrowings in Chinese Renminbi

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Sept. 29 – Taking into consideration the particular needs of the infrastructure sector, the existing external commercial borrowing (ECB) policy has been reviewed in discussions with the Government of India and it has been decided to permit Indian companies which are in the infrastructure sector – where “infrastructure” is defined under the existing guidelines on ECB – to avail of ECBs in Chinese renminbi (RMB), under the approval route, subject to a yearly cap of US$1 billion until further review.

Once the approval is taken, the authorization of the Reserve Bank will be applicable for a period of three months from the date of issue of the approval letter and the loan agreement should be executed within the validity period. The organization may subsequently submit the completed Form 83 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India for allotment of loan registration number (LRN) within seven days (from the date of signing the loan agreement between the borrower and the lender). In case the borrower fails to obtain LRN within the above period, the sanction of the Reserve Bank will stand cancelled.

Moreover, AD Category-I bank will be allowed to open Nostro accounts in RMB. The elected AD Category-I bank shall observe the end-use of funds and bank(s) in India will not be allowed to provide any form of guarantee(s). All other conditions of ECB, such as eligible borrower, recognized lender, all-in-cost, average maturity, prepayment, refinancing of existing ECB, and reporting arrangements shall remain unchanged and shall be complied with.

The adjusted ECB policy will come into existence with instant effect and is subject to review. Compulsory amendments to the Foreign Exchange Management (Manner of Receipt and Payment) Regulations (2000) are being issued independently, wherever necessary. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.

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