(Department of Economic Affairs), Ministry of Finance,
Government of India along with Reserve
Bank of India, monitors and regulates
E. C. B. guidelines and policies. In India, External
Commercial Borrowings are being permitted by the
Government for providing an additional source of funds
to Indian corporate and PSUs for financing expansion of
existing capacity and as well as for fresh investment,
to augment the resources available domestically.
External Commercial Borrowings can be used for any
purpose (rupee-related expenditure as well as imports)
except for investment in stock market and speculation in
The important aspect of ECB policy is to provide
flexibility in borrowings by Indian corporate, at
the same time maintaining prudent limits for total
external borrowings. The guiding principles for ECB
Policy are to keep maturities long, costs low, and
encourage infrastructure and export sector financing
which are crucial for overall growth of the economy.
The ECB policy focuses on three aspects: 1.
Eligibility criteria for accessing external markets.
2. The total volume of borrowings to be raised and
their maturity structure. 3. End use of the funds
• ECBs are defined to include commercial
bank loans, buyers'
credit, suppliers' credit, securitized instruments such
as Floating Rate Notes and Fixed Rate Bonds etc., credit
from official export credit agencies and commercial
borrowings from the private sector window of
Multilateral Financial Institutions such as
International Finance Corporation (Washington), ADB,
AFIC, CDC, etc.
• ECBs are being permitted by the
Government as a source of finance for Indian Corporate
for expansion of existing capacity as well as for fresh
• The policy seeks to keep an annual cap
or ceiling on access to ECB, consistent with prudent
• The policy also seeks to give greater
priority for projects in the infrastructure and core
sectors such as Power, oil Exploration, Telecom,
Railways, Roads & Bridges, Ports, Industrial Parks and
Urban Infrastructure etc. and the export sector.
• Applicants will be free to raise it
from any internationally recognized source such as
banks, export credit agencies,
suppliers of equipment, foreign collaborators, foreign
equity-holders, international capital markets etc.
offers from unrecognized sources will not be