Infrastructure Companies – Bridge Finance before availing ECB

Cooling towers of the e.on power plant

To Avail Buyer’s / Supplier’s Credit: E: sanjaymandavia@gmail.com, M: +919825560186

Considering the specific needs of the Infrastructure sector, RBI under its circular External Commercial Borrowing (ECB) – Bridge Finance for Infrastructure Dated 23-09-2011, reviewed the ECB policy. An amendment was made in this policy on 21-09-2012. Brief summary is given below:

Conditions in case of ECB under Approval Route

Allowed Indian companies which are in infrastructure sector to import capital goods by availing of short-term credit (including buyer’s credit and supplier’s credit) in the nature of “Bridge Finance” under the approval route,subject to following conditions

  • The bridge finance shall be replaced with a long-term ECB
  • The long-term ECB shall comply with all the extant ECB norms
  • Prior approval shall be sought from Reserve Bank for replacing the bridge finance with a long-term ECB

Conditions in case of ECB under Automatic Route

Allowed Indian companies which are in infrastructure sector to import capital goods by availing of short-term credit (including buyer’s credit and supplier’s credit) in the nature of “Bridge Finance” under the ECB automatic route, subject to following conditions

  • the buyers’/suppliers’ credit is refinanced through an ECB before the maximum permissible period of trade credit;
  • the AD evidences the import of capital goods by verifying the Bill of Entry;
  • the buyers’/suppliers’ credit availed of is compliant with the extant guidelines on trade credit and the goods imported conform to the DGFT policy on imports; and
  • the proposed ECB is compliant with all the other extant guidelines relating to availment of ECB.

2. The borrowers will, therefore, approach the Reserve Bank under the approval route only at the time of availing of bridge finance which will be examined subject to conditions

  • the bridge finance shall be replaced with a long term ECB;
  • the long term ECB shall comply with all the extant ECB norms;

Common Conditions in both the cases

The designated AD – Category I bank shall monitor the end-use of funds and banks in India will not be permitted to provide any form of guarantees. The designated AD – Category I bank shall evidence the import of capital goods by verifying the Bill of Entry. All other conditions of ECB, such as eligible borrower, recognized lender, all-in-cost, average maturity, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged and should be complied with.

Note: As per RBI Circular on External Commercial Borrowing (ECB) and Trade Credit Dated 01-07-2011, Infrastructure sector is defined as

  1. Power
  2. Telecommunication
  3. Railways
  4. Roads including bridges
  5. Sea port and Airport
  6. Industrial parks
  7. Urban infrastructure (water supply, sanitation and sewage projects)
  8. Mining, exploration and refining
  9. Cold storage or cold room facility, including for farm level pre-cooling, for preservation or storage of agricultural and allied produce, marine products and meat

Reference

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s