External Commercial Borrowing(ECB)
Let Edugains manage your External Commercial Borrowing(ECB) in an easy way :-
Loan application management
1. Assistance in loan availing from overseas bank. 2. Provide better FX rates for conversion of payments of principals/ interests.
ECB structuring and pricing
Assistance in structuring the whole loan process that are just according to the RBI Guidelines.
FEMA compliance and approval
Monthly return fillings that are according to the RBI mandate (ECB-2 Return)
Free Q&A with our ECB expert
Basic insights about External Commercial Borrowings(ECB)
ECB stands for External Commercial Borrowings (ECB). ECB helps Indian corporations to raise funds in foreign currencies from overseas lenders. ECB include commercial bank loans, buyers’ credit, and suppliers’ credit, credit from official export credit agencies and commercial borrowings from Multilateral Financial Institutions. RBI has issued circulars and formal guidelines for the specification of norms for such borrowings
- In our experience almost 90% of the cases are under automatic routes
- The process includes filling various forms and submitting it to the AD banks
- On AD Banks approval, it goes to RBI.
- RBI usually approves it within a day and issues the LRN
- Post LRN, drawdown can take place.
- Under Approval route, RBI approval can take some what between 2 weeks to 2 months.
If ECB is taken from an equity holder, the interest rate could be bilaterally decided. In our experience, the lender keeps interest rate very competitive as the idea is to support the borrower. If the lender is a bank, the interest rate is a function of credit assessment and period of ECB. In general, banks charge a rate ranging between Libor + 2% to LIBOR + 4.5%.
- Mostly banks and financial institutions, overseas suppliers, foreign equity holders, joint venture partner, and financial institutions in International Financial Services Centers (IFSCs) in India
- In India, not all banks are active in ECB. Only large Public Sector Banks (PSBs), large private sector banks, and select MNC Banks are actively involved in ECB
- As per current trend of type of lenders, we find that 70% of ECB are from the parent company or from the JV partner.
ECB cannot be taken for –
- Real estate activities
- Investment in capital market
- Equity investment
- On-lending to other entities
Why Edugains for ECB?
Import/Export Payments
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1. Advisory and Execution of transactions. 2. Monitor each and every import / export payment. 3. Advisory on market timings. 4. Bank negotiations to get best price.
Hedging Strategy Management
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1. Assistance on when to hedge or not to hedge. 2. Suggest an ideal time period, strategy and amount to hedge according to the market. 3. Also on cancellation or early utilization of transactions.
Reducing overall finance cost
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1. Audit Bank charges/Interest outgo without change of bank. 2. Suggest best type of loan product according to business needs. 3. Advise on when to borrow in USD or INR.
Frequently asked questions on External Commercial Borrowing(ECB)
Can I avail ECB if my business has both manufacturing and trading?
Yes, you could avail ECB for manufacturing part of your business. You would have to prepare data on capital usage in manufacturing business and then apply for ECB.
Is it compulsory to get external credit rating for availing bank loans?
No. However it depends from company to company as in some cases of PSU, they have made it compulsory.
Which is better Consortium vs multiple banking?
Form a corporate’s point of view, multiple banking is better. However, if size of total bank borrowings from banking system increases, RBI encourages consortium banking.
