{"id":28697,"date":"2021-04-08T11:32:34","date_gmt":"2021-04-08T06:02:34","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=28697"},"modified":"2024-10-11T11:51:59","modified_gmt":"2024-10-11T06:21:59","slug":"what-are-the-updated-ecb-norm-for-nbfc","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/what-are-the-updated-ecb-norm-for-nbfc\/","title":{"rendered":"What are the Updated ECB Norms for NBFC?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Reserve Bank of India (RBI) by press release&nbsp;dated 30<sup>th<\/sup> July, 2019 has revised the outline for External Commercial Borrowings on the basis of the feedback from the stakeholders and also in consultation with the Government of India. The RBI has decided to relax the end-use limitations with a purpose to ease the norms for NBFC\u2019s and Corporate. External Commercial Borrowing&nbsp;(ECBs) is basically a loan in foreign currency that an Indian entity avails from a lender who is non-resident. Generally these loans are given by foreign commercial banks and other institutions. It is a loan that is availed from non-resident lenders and also with an average minimum maturity for 3 years. In this article, let us know the updated ECB Norm for <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFC<\/strong><\/a>.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/what-are-the-updated-ecb-norm-for-nbfc\/#Updated_ECB_Norms_for_NBFC\" >Updated ECB Norms for NBFC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/what-are-the-updated-ecb-norm-for-nbfc\/#Talk_To_Expert\" >Talk To Expert<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/what-are-the-updated-ecb-norm-for-nbfc\/#What_are_the_Updated_ECB_Norms_for_NBFC\" >What are the Updated ECB Norms for NBFC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/what-are-the-updated-ecb-norm-for-nbfc\/#Need_for_New_ECB_Norms_for_NBFC_Funding\" >Need for New ECB Norms for NBFC Funding<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/what-are-the-updated-ecb-norm-for-nbfc\/#The_Impact_of_ECB_Norms_for_NBFC\" >The Impact of ECB Norms for NBFC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/what-are-the-updated-ecb-norm-for-nbfc\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Updated_ECB_Norms_for_NBFC\"><\/span>Updated ECB Norms for NBFC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The framework of ECB norm in India is primarily governed by the<strong><a href=\"https:\/\/corpbiz.io\/fema-compliance\"> Foreign Exchange Management Act<\/a><\/strong>, 1999 (FEMA). A variety of different provisions in reference to this type of borrowing are included in the Foreign Exchange Management Regulations, 2018\u00a0(Borrowing and Lending) that is framed under FEMA.<\/p>\n\n\n\n<p><em><strong>According to the framework, the eligible borrowers are <\/strong><\/em><\/p>\n\n\n\n<ul>\n<li>all entities eligible to receive FDI; <\/li>\n\n\n\n<li>Port Trusts; <\/li>\n\n\n\n<li>Units in Special Economic Zones;<\/li>\n\n\n\n<li>Small Industries Development Bank of India; <\/li>\n\n\n\n<li>Export-Import Bank of India; and <\/li>\n\n\n\n<li>All such entities that are eligible to raise the\nECB in a Convertible Foreign Currency<\/li>\n\n\n\n<li>Registered entities engaged in micro-finance\nactivities, like the registered societies, cooperatives, registered not for profit\ncompanies, trusts, and non-governmental organizations (allowed only for Indian\nRupee denominated ECB). <\/li>\n<\/ul>\n\n\n\n<p>The RBI has now officially allowed raising ECB for the purposes as given below from the recognized lenders, but the exception shall include overseas subsidiaries or foreign branches of Indian banks which shall be subject to the leverage and limit requirements:-<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Talk_To_Expert\"><\/span>Talk To Expert<span class=\"ez-toc-section-end\"><\/span><\/h2><div class=\"calling-person blog_cta my-4\"> \n\n  \n\n    <div class=\"row\"> \n\n        <div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-12\"> \n\n            <div class=\"d-flex flex-nowrap\"> \n\n                <div class=\"user-online\"> <img decoding=\"async\" src=\"https:\/\/corpbiz.io\/img\/user.jpg\" alt=\"corpbiz\"> <\/div> \n\n                <div class=\"user-online-details ms-3 align-self-center\"> \n\n                    <h2 class=\"text-white mt-0\"><span class=\"ez-toc-section\" id=\"What_are_the_Updated_ECB_Norms_for_NBFC\"><\/span> What are the Updated ECB Norms for NBFC? <span class=\"ez-toc-section-end\"><\/span><\/h2> \n\n                    <p class=\"mt-3\"><i class=\"fa fa-star\"><\/i><i class=\"fa fa-star\"><\/i><i class=\"fa fa-star\"><\/i><i \n\n                            class=\"fa fa-star\"><\/i><i class=\"fa fa-star-half-full\"><\/i><span \n\n                            class=\"ms-2 text-white\">(4.8)<\/span><\/p> \n\n                <\/div> \n\n            <\/div> \n\n          \n\n        <\/div> \n\n     \n\n        <div class=\"col-xs-12 col-sm-12 col-md-12 col-lg-8 mx-auto\"> \n\n            <div class=\"d-flex justify-content-between call-chat\"> <a href=\"tel:919121230280\"> <span>Call Now \n\n            <\/span><img decoding=\"async\" class=\"ms-2\" src=\"https:\/\/corpbiz.io\/admin\/style\/images\/userfiles\/image\/new_call_icon.png\" \n\n                alt=\"Call With \" width=\"32px\"> \n\n        <\/a> <a href=\"https:\/\/api.whatsapp.com\/send?phone=919289379709&amp;text=Hi, I am Looking For FSSAI Basic.\" target=\"_blank\" rel=\"noopener\"> <span>Chat With Us<\/span><img decoding=\"async\" class=\"ms-2\" \n\n                src=\"https:\/\/corpbiz.io\/img\/chat-with-expert.png\" alt=\"Chat With \" width=\"32px\"> <\/a> <\/div> \n\n        <\/div> \n\n    <\/div> \n\n<\/div> \n\n\n\n<h3 class=\"wp-block-heading\">General\nCorporate and Working Capital Purposes <\/h3>\n\n\n\n<ul>\n<li>ECB can\nbe raised by the eligible borrowers with an average minimum maturity period\n(&#8220;<strong>MAMP<\/strong>&#8220;) for 10 years for the purposes of the working capital\nand general corporate.<\/li>\n\n\n\n<li>ECB\nborrowings with MAMP shall be lent by the NBFCs for 10 years for general\ncorporate purposes and working capital purposes.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Repayment of\nRupee Loans that are Domestically Availed for Capital Expenditure<\/h3>\n\n\n\n<p>The ECB can be raised by the eligible borrowers with 7\nyears of MAMP for repaying the Rupee loans that is domestically availed for\ncapital expenditure. Similarly, ECBs can be raised by NBFCs with a MAMP of 7\nyears for repaying the Rupee loans domestically availed for capital expenditure\nand for lending.<\/p>\n\n\n\n<p>Nonetheless, for the repayment of domestically availed\nRupee loans by the NBFCs or the eligible borrowers for all the purposes except\nthe capital expenditure, the average minimum maturity period is mandated to be\nfor 10 years.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Capital\nExpenditure in Manufacturing and Infrastructure Sector<\/h3>\n\n\n\n<p>The ECB can be raised by the eligible borrowers for\nrepaying the Rupee loans that are domestically availed for the capital\nexpenditure in the infrastructure and manufacturing sectors if such is\nclassified as:<\/p>\n\n\n\n<ul>\n<li>A special mention account (where a loan or an advance and the interest payment and principal is overdue from 61-90 days) or<\/li>\n\n\n\n<li>A non-performing asset (an advance or a loan where the principal or the interest payment was overdue for a time period of 90 days) &#8211; under any one of the time settlement with lenders.<\/li>\n<\/ul>\n\n\n\n<p>The Lender banks are allowed to sell loans to the lenders who are eligible except the overseas subsidiaries of Indian banks or foreign branches but it shall be subject to the stipulation that the eligible lender must act in accordance with the guidelines of ECB like those associated to MAMP and all in cost and also amongst other appropriate terms within the ECB framework.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/types-of-nbfcs-in-india\/\">Types of NBFCs in India \u2013 An Overview<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Need_for_New_ECB_Norms_for_NBFC_Funding\"><\/span>Need for New ECB Norms for NBFC Funding<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"1000\" height=\"375\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Need-for-New-ECB-Norms-for-NBFC-Funding.png\" alt=\"Need for New ECB Norms for NBFC Funding\" class=\"wp-image-28702\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Need-for-New-ECB-Norms-for-NBFC-Funding.png 1000w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Need-for-New-ECB-Norms-for-NBFC-Funding-300x113.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/Need-for-New-ECB-Norms-for-NBFC-Funding-768x288.png 768w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/><\/figure><\/div>\n\n\n<p>Bank\nloans, funding, and mutual funds borrowings are the three most important\nsources of NBFC borrowings<strong><em>.<\/em><\/strong>&nbsp;During the crisis, the NBFC sector had to face a\nrough time in collecting funds from any of the above given three in the\ndomestic market.<\/p>\n\n\n\n<p>The new norms were much needed in the existing problem of Liquidity crunch in the NBFC sector. After the NBFC crisis surfaced, the banks considerably had stopped lending to NBFCs. This situation created a condition of panic for all the NBFC in the <em><strong>country<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Country\"><em><strong>[1]<\/strong><\/em><\/a><\/sup>.<\/p>\n\n\n\n<p>According to the industry expert, the reason behind\nthe trouble faced by the NBFC sector is not primarily due to its lending\npractices but because of the NBFCs borrowing patterns. &nbsp;NBFCs used to lend loans for a long period of\n8 to 10 years and on the other hand NBFCs used to accept a borrowing in commercial\npapers or short term debt papers for a time period of 6 months to 3 years. <\/p>\n\n\n\n<p>This is majorly in practice for the NBFCs that are dealing in property loan sector and real estate. Therefore, because of this ground in particular the NBFCs are much in the need for the updated ECB norm.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Impact_of_ECB_Norms_for_NBFC\"><\/span>The Impact of ECB Norms for NBFC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>While the NBFC\u2019s were struggling to raise their funds from the domestic market, RBI came up with the notification of the updated ECB norm. This step is anticipated to give relief to such NBFC and corporate entities in raising the overseas funds. According to the new ECB norm by RBI, the minimum ECB maturity period now is for 10 years and it is for the purposes of general corporate and working capital purposes.<\/p>\n\n\n\n<p>It is expected that the influx of NBFC funding through\nECB route is to assist NBFC\u2019s that are struggling to preserve a positive ratio\nfor working capital. The function of these funds is to provide flexibility in the\noperation of business process.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The benefit of using ECB for bank loans repayment is expected to balance the default of rates in NBFCs. NBFCs are the major reason behind inflow of the funds for the MSME sector. Therefore, the constancy in the NBFC sector is imperative for the development of <a href=\"https:\/\/corpbiz.io\/msme-registration\"><strong>MSME<\/strong><\/a>. <\/p>\n\n\n\n<p>Thus, funding through ECB norm in NBFCs will provide flexibility to its lending operations and will give financial stability to the NBFC sector and at the same time it shall make a cheaper source of NBFC funding.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/step-by-step-nbfc-registration-procedure\/\">NBFC Registration: Step by Step Procedure<\/a><\/mark><\/p>\n\n\n<a href=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/04\/NT20F2121527F10B4CB7B93F63AE8B5C4760.pdf\" class=\"pdfemb-viewer\" style=\"\" data-width=\"max\" data-height=\"max\"  data-toolbar=\"bottom\" data-toolbar-fixed=\"off\">NT20F2121527F10B4CB7B93F63AE8B5C4760<br\/><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Reserve Bank of India (RBI) by press release&nbsp;dated 30th July, 2019 has revised the outline for External Commercial Borrowings on the basis of the feedback from the stakeholders and also in consultation with the Government of India. The RBI has decided to relax the end-use limitations with a purpose to ease the norms for [&hellip;]<\/p>\n","protected":false},"author":33,"featured_media":28703,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[1652],"acf":{"service_id":"8"},"authorName":"Kandarp Vanita","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/image_2021_02_01T09_09_44_024Z.png","authorDescription":"Kandarp Vanita has done masters in Corporate and Commercial Law from WB National University of Juridical Sciences. She has 3 yrs of experience in drafting legal documents &amp; dissertations. Being a curious reader, she is also passionately into providing legal backups and comprehensive understandings in every aspect of Law to the firms.","postViews":3928,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28697"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/33"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=28697"}],"version-history":[{"count":17,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28697\/revisions"}],"predecessor-version":[{"id":66805,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/28697\/revisions\/66805"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/28703"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=28697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=28697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=28697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}