PARKING OF EXTERNAL COMMERCIAL BORROWINGS PROCEEDS IN INDIA


 External Commercial Borrowings and Trade Credits 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 Notification No. FEMA 3/ 2000-RB viz. Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, dated May 3, 2000, as amended from time to time.

For easing norms of parking external commercial borrowings (ECB),  Reserve Bank of India (“RBI”) has vide its Circular No. 39 dated 21st November, 2014 permitted AD Category -I banks to allow eligible External Commercial Borrowing (“ECB”) borrowers to park ECB proceeds (both under the automatic and approval routes) in term deposits with AD Category- I banks in India for a maximum period of six months before being utilised for the purpose for which they were brought in as a Loan.
This instruction issued by RBI has been have been under section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999.
As per the existing norms, the money raised from abroad meant for rupee expenditure in India had to be brought immediately for credit to the rupee accounts of such borrowers with AD category – 1 banks. 
However, the facility of deposit will be subject to complying with some conditions which are as below:
a)      The applicable guidelines on eligible borrower, recognized lender, average maturity period, all-in-cost, permitted end uses, etc. should be complied with.
b)      No charge in any form should be created on such term deposits i.e. to say that the term deposits should be kept unencumbered during their currency.
c)      Such term deposits should be exclusively in the name of the borrower.
d)      Such term deposits can be liquidated as and when required








Ø  The borrowers are allowed to use such proceeds for local sourcing of capital goods, on-lending to Self-Help Groups or for micro credit and payment for spectrum allocation. 

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