March 17, 1999

A.D.(M.A. Series) Circular No.6

To

Dear Sirs,

At present in terms of paragraph 7B.8 and 7B.8A of Exchange Control Manual (ECM) Reserve Bank considers proposals from Indian corporates/institutions for (a) availing of short term foreign currency loan/credit with maturity of less than 3 years and (b) raising external commercial borrowings (ECB) under USD 5 million Scheme with a minimum simple maturity of 3 years. All other proposals for raising foreign currency borrowings are required to be referred to Government of India.

2. The Government of India, Ministry of Finance have since delegated powers to Reserve Bank to consider proposals for raising ECBs upto USD 10 million or its equivalent with a minimum average maturity of 3 years for utilising the proceeds thereof for business related expenses including expenditure to be incurred in Indian rupees under various windows i.e. Exporters’/Foreign Exchange Earners’ Scheme, Infrastructure Projects Scheme, Long Term Borrowers Scheme and others in respect of which proposals were hitherto being considered by them. Accordingly, applications for raising ECBs upto USD 10 million or its equivalent for the purposes indicated above will henceforth be considered by Reserve Bank. The applications in this regard should be submitted in Form ECB 6 through an authorised dealer to the Chief General Manager, Exchange Control Department, ECB Division, Reserve Bank of India, Central Office, Mumbai - 400001 .

3. All procedural formalities under the USD 10 million Scheme will be same as in case of existing USD 5 million Scheme.

4. The instructions contained in paragraph 7B.6 of ECM regarding reporting of drawal of loan, utilisation and repayment thereof in statement in Form ECB 2 as also instructions contained in paragraph 7B.7 of ECM for repayment of loan and payment of other charges under other ECB schemes should be followed, mutatis-mutandis, in the case of the USD 10 million Scheme also.

5. The following consequential amendments may be carried out in the Exchange Control Manual.

6. Authorised dealers may bring the contents of this circular to the notice of their constituents concerned.

7. The directions contained in this circular have been issued under Section 73(3) of Foreign Exchange Regulation Act 1973 (46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.

Yours faithfully

Chief General Manager

7B.1 (i) Proposals for raising foreign currency loans/ credits viz. Buyer’s Credit, Supplier’s Credit, or lines of credit by firms/companies/lending institutions, banks etc. for financing cost of import of goods, technology or for any other purposes other than those considered by Reserve bank in terms of paragraph 7B.8 and 7B.8A should first be submitted to Government of India, Ministry of Finance ( Department of Economic Affairs), ECB Division, New Delhi for necessary clearance. The proposals are considered by the Government on merits and in light of prevailing Government policy.

7B.8A (i) Proposals from corporates/institutions for raising external commercial borrowings (ECBs) will be considered under the following schemes:

Applications for raising ECB under USD 5 million Scheme or under USD 10 million Scheme should be submitted in form ECB 6 through an authorised dealer to the Chief General manager, Exchange Control Department, ECB Division, Central Office, Reserve Bank of India, Mumbai,400 001.