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As announced in the Budget 2005-06, a window has been opened to enable qualified NGOs engaged in micro-finance to access the External Commercial Borrowing (ECB) window.
As per extant guidelines, all corporates registered under the Companies Act, 1956 except financial intermediaries, are eligible borrowers under the automatic route for ECBs up to USD 500 million. Proposals not covered under the automatic route are considered by a committee set up by RBI. Financial institutions dealing exclusively with infrastructure or export finance can raise ECB through the approval route. Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Government will also be permitted to the extent of their investment in the package and assessment by RBI based on prudential norms.
ECB can be raised for investment (such as import of capital goods, new projects, modernisation/expansion of existing production units) in real sector, that is, industrial sector including small and medium enterprises (SME) and infrastructure sector – in India. Utilisation of ECB proceeds is not permitted for on-lending, investment in capital market and in real estate by corporates except development of integrated township as defined by Ministry of Commerce & Industry. End uses of ECB for working capital, general corporate purpose and repayment of existing rupee loans are also not permitted. No time-frame has been fixed by which these restrictions are going to be relaxed.
This information was given by Shri S.S. Palanimanickam, Minister of State for Finance in reply to a quested raised by Shri K. Rama Mohana Rao in Rajya Sabha today.
BSC/BY/DN-188-05
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