With the raise in technological up gradation and capacity expansion Indian Corporate World tends to tap more external debt due to the leverage of cost of funding and size of loan. The recent trend in corporate borrowings witness phenomenal increase in overseas borrowings. According to Reserve Bank of India release dated July 01st India’s external debt position as on March 2008 was at $221.2 billion, up 30.4 per cent over end-March 2007. Among the external debt External Commercial Borrowings, fancily called ECB recorded the maximum increase.
An in-depth understanding of regulations governing ECB becomes imperative. An attempt is being made to explain its procedures.
Government of India in consultation with Reserve Bank of India constantly reviews ECB policy in tune with the evolving macroeconomic situation, changing market conditions, sectoral requirements, the external sector and such other factors.
External Commercial Borrowings availed of by residents are governed by clause (d) of sub-section 3 of section 6 of the Foreign Exchange Management Act, 1999 read with section 6 of Notification No. FEMA 3 / 2000-RB dated May 3, 2000 as amended from time to time.
RBI issues Master Circular consolidating all existing instructions on the subject of “External
Commercial Borrowings and Trade Credits” at one place. The current Master Circular issued dated July 1st 2008 is being issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2009 and will be replaced by an updated Master Circular on the subject.
For better understanding, the subject is bisect into three parts as follows:
Part I: Meaning, Approval / Automatic Route, Three aspects of ECB
Part II: Other aspects of ECB
Part III: Procedural Aspects
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment