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SCHEDULE II - Regulation 6(2) - Borrowings in Foreign Exchange under the Approval Route - Foreign Exchange Management (Borrowing or Lending In Foreign Exchange ) Regulations, 2000Extract SCHEDULE II [See Regulation 6(2)] Borrowings in Foreign Exchange under the Approval Route (1) The borrowing in foreign currency (other than the borrowings under Schedule I) by a person resident in India may be made under any of the types set out in this Schedule. (2) The application for the approval of the Reserve Bank under Regulation 6(2) for borrowing under any of the types where its approval is required shall be made in the Form as specified by the Reserve Bank from time to time. (3) The borrowing in foreign exchange by a person resident in India under the Approval Route is subject to the terms and conditions set out in this schedule. (i) Eligibility The following entities shall be eligible to apply for foreign currency borrowings under the Approval Route - (a) Any corporate registered under the Company's Act, 1956. (b) Financial institutions dealing exclusively with infrastructure or export finance such as IDFC, IL FS, Power Finance Corporation, Power Trading Corporation, IRCON and Exim Bank. (c) Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Central Government. (d) Entities falling outside the purview of the Automatic Route as per Schedule I. (e) Any other entity as specified by the Reserve Bank. (ii) Lenders The borrowings in foreign currency by way of issue of bonds, floating rate notes or other debt instruments by whatever name called may be made from - (a) International bank or export credit agency or international capital market or (b) Multilateral financial institutions, namely, IFC, ADB, CDC etc., or (c) Foreign collaborator or foreign equity holder as specified by the Reserve Bank or (d) Supplier of equipments provided the amount of loan raised does not exceed the total cost of the equipment being supplied by the lender or 1 (e) Any other eligible entity as prescribed by the Reserve Bank in consultation with Government of India (iii) Purpose (End-use) (A) Borrowing in foreign exchange in terms of this Schedule may be for any of the following purposes, namely:- (a) for investment (such as import of capital goods, new projects, modernisation / expansion of existing production units) in real sector - industrial sector including small and medium enterprises (SME) and infrastructure sector - in India. 13 [Explanation: The following sectors will qualify as infrastructure sectors, namely, (a) Energy which will include (i) electricity generation, (ii) electricity transmission, (iii) electricity distribution, (iv) oil pipelines, (v) oil/gas/liquefied natural gas (LNG) storage facility (includes strategic storage of crude oil) and (vi) gas pipelines (includes city gas distribution network); (b) Communication which will include (i) mobile telephony services / companies providing cellular services, (ii) fixed network telecommunication (includes optic fibre / cable networks which provide broadband / internet) and (iii) telecommunication towers; (c) Transport which will include (i) railways (railway track, tunnel, viaduct, bridges and includes supporting terminal infrastructure such as loading / unloading terminals, stations and buildings), (ii) roads and bridges, (iii) ports, (iv) inland waterways, (v) airport and (vi) urban public transport (except rolling stock in case of urban road transport); (d) Water and sanitation which will include (i) water supply pipelines, (ii) solid waste management, (iii) water treatment plants, (iv) sewage projects (sewage collection, treatment and disposal system), (v) irrigation (dams, channels, embankments, etc.) and (vi) storm water drainage system; (e) (i) mining, (ii) exploration and (iii) refining; (f) Social and commercial infrastructure which will include (i) hospitals (capital stock and includes medical colleges and para medical training institutes), (ii) Hotel Sector which will include hotels with fixed capital investment of ₹ 200 crore and above, convention centres with fixed capital investment of ₹ 300 core and above and three star or higher category classified hotels located outside cities with population of more than 1 million (fixed capital investment is excluding of land value), (iii) common infrastructure for industrial parks, SEZs, tourism facilities, (iv) fertilizer (capital investment), (v) post harvest storage infrastructure for agriculture and horticulture produce including cold storage, (vi) soil testing laboratories and (vii) cold chain (includes cold room facility for farm level pre-cooling, for preservation or storage or agriculture and allied produce, marine products and meat. (g) Any other sectors as prescribed by the Reserve Bank in consultation with Government of India.] (b) for first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Government's disinvestment programme of PSU shares. (c) for direct investment in overseas Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad. 6 [(AA) Borrowings in foreign exchange per borrower company per financial year up to such amounts as directed by the Reserve Bank from time to time shall be permitted for such permissible end-uses as indicated by Reserve Bank from time to time] (B) Other than the purposes specified hereinabove, the borrowings shall not be utilised for any other purpose including the following purposes, namely:- On-lending, investment in capital (stock) market, investment in real estate business, working capital requirements, general corporate purpose and repayment of Rupee loans 5 Note - Omitted 4 [iv) Maturity ( a ) The maturity of borrowings in foreign exchange shall be as under: Amount Average Maturity ( i ) Upto USD 20 million or equivalent Not less than 3 years ( ii ) Exceeding USD 20 million or equivalent Not less than 5 years (b) Borrowings upto USD 20 million can have call/put option provided the minimum average maturity of 3 years as prescribed in clause (a) is complied with before exercising call/put option. ] (c) No prepayment and call/put options shall be permitted for borrowings in foreign exchange exceeding an amount of US $ 500 million and upto an amount of US $ 750 million or equivalent for a minimum average maturity of ten years. (v) All-in-cost ceilings The all-in-cost ceilings for the borrowing in foreign exchange shall be specified by the Reserve Bank from time to time (vi) Security The borrower shall be at liberty to provide security to the lender / suppliers, provided that- (a) Where the security is in form of immovable property in India or shares of a company in India, it shall be subject to Regulation 8 of Notification No.FEMA.21/2000-RB dated May 3, 2000 and Regulation 3 of Notification No.FEMA.20/2000-RB dated May 3, 2000, respectively. (b) Guarantee Banks, financial institutions and Non-Banking Finance Companies shall not provide (issue) guarantee or Letter of Comfort or Standby Letter of Credit in favour of overseas lender on behalf of their constituents for their borrowings in foreign exchange. 3 Exception 1- Banks, financial institutions and Non-Banking Finance Companies shall be permitted to provide Bank Guarantee, or Letter of Comfort or Standby Letter of Credit in favour of Small and Medium Enterprises (SMEs) with the approval of the Reserve Bank. 3 Exception- 2 -Banks may provide Bank Guarantee, Standby Letter of Credit, Letter of Undertaking or Letter of Comfort in respect of ECB by textile companies for modernisation or expansion of their textile units, with the approval of the Reserve Bank. (vii) Prepayment Notwithstanding the provisions of clause (iv) above, prepayment of outstanding foreign currency loan may be made as per the directives issued by the Reserve Bank from time to time. 8 [viii) Parking of loan amount The proceeds of borrowings in foreign exchange availed under the schedule may, pending utilisation for permissible end-uses, be parked abroad or in India as directed by the Reserve Bank from time to time] (ix) Loan Agreement The loan agreement entered into by the borrower with the overseas lender shall strictly conform with these Regulations. The procedure for obtaining loan registration number would be as specified by the Reserve Bank. (x) Drawal of loan Draw-downs of borrowing in foreign exchange shall be made strictly in accordance with the terms of the loan agreement only after obtaining the loan registration number from the Reserve Bank. (xi) Reporting The borrower shall adhere to the reporting procedure as specified by THE Reserve Bank from time to time. (xii) Debt Servicing The designated Authorised Dealer (AD) shall have the general permission to make remittances of principal, interest and other charges in conformity with the guidelines on borrowing in foreign exchange from overseas, issued by Central Government / the Reserve Bank from time to time. 9 [(xiii) foreign currency borrowings for low cost affordable housing projects Developers/builders, Housing Finance Companies (HFCs) and National Housing Bank (NHB) shall avail of foreign currency loans in accordance with the Act or the Rules and Regulations made thereunder in accordance with this Schedule, for financing developers / prospective owners of low cost affordable housing projects / units subject to the terms and conditions as may be specified by the Reserve Bank, from time to time in this regard. ] 11 [(xiv) Rescheduling of an existing Foreign Currency Borrowing Rescheduling of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made thereunder, may be made in accordance with this Schedule at a higher cost of borrowing within the all-in-cost ceiling prescribed by the Reserve Bank, under sub-paragraph (v), from time to time. ] (4) Refinancing of existing borrowing in foreign exchange 12 [(i) Refinancing of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made thereunder, may be made by making fresh borrowing in foreign exchange in accordance with this Schedule at a higher cost of borrowing within the all-in-cost ceiling prescribed by the Reserve Bank from time to time, under sub-paragraph (v) of paragraph (3) and the outstanding maturity of the original borrowing is not reduced.] (ii) Provisions of sub-paragraphs (iv) of paragraph 3 shall not apply to the borrowings made under Clause 4(i). 10 [ 2 [***]] 14 [ 6. Provided that under these Regulations, the Reserve Bank may, in consultation with the Government of India, prescribe for the approval route, any provision or proviso regarding various parameters listed in paragraphs 1 to 5 above of this Schedule or any other parameter as prescribed by the Reserve Bank and also prescribe the date from which any or all of the existing provisions will cease to exist, in respect of borrowings from overseas, whether in foreign currency or Indian Rupees, such as addition / deletion of borrowers eligible to raise such borrowings, overseas lenders / investors, purposes of such borrowings, change in amount, maturity and all-incost, norms regarding security, pre-payment, parking of ECB proceeds, reporting and drawal of loan, refinancing, debt servicing, etc. ] ******************* Note : 1. Has been inserted vide Notification No. 157/2007 dated 30/8/2007 (w.e.f 1st day of August, 2005) 2. Has been inserted vide Notification No. 157/2007 dated 30/8/2007 (w.e.f 1st day of August, 2005) 3 . Has been numbered as Exception 1 and shall be deemed to have been numbered with effect from the 4th day of November, 2005 and after Exception 1 as so numbered, the above Exception has been inserted and shall be deemed to have been inserted with effect from the 4th day of November, 2005 4. Has been substituted vide Notification No. 157/2007 dated 30/8/2007 (w.e.f 4th day of Dec, 2006), before it was read as, Maturity The maturity of the borrowings in foreign exchange shall be as under : Amount Minimum Average Maturity i) Up to US$ 20 Million or equivalent Not less than 3 years. ii) Exceeding US$ 20 Million and upto US$ 500 Million or equivalent Not less than 5 years Note - Borrowing up to US$ 20 Million can have call/put option provided the minimum average maturity of 3 years as prescribed above is complied with before exercising call/put option. Further substituted vide Notification [No. FEMA 232/2012-RB], Dated 30-5-2012, before it was read as:- Maturity- ( a) The maturity of borrowings in foreign exchange shall be as under : Serial Number Amount Average Maturity ( i ) Upto US $20 million or equivalent Not less than 3 years ( ii ) Exceeding US $ 20 million and upto US $ 500 million or equivalent Not less than 5 years ( iii ) Exceeding US $ 500 million and upto US $ 750 million or equivalent More than 10 years (b) Borrowings upto US $ 20 million can have call/pit option provided the minimum average maturity of 3 years as prescribed in clause (a) is complied with before exercising call/put option; 5. Has been Omitted vide Notification No 157/2007 dated 30/8/2007 before it was read as, For the purpose of this clause, real estate business shall not include development of integrated township as defined by the Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, SIA (FC Division), Press Note 3(2002 Series) dated January 4, 2002. 6. Substituted vide notification no. 194/2009 dated 17/6/2009 with effect from 29th day of May, 2008, before it was inserted vide Notification No 157/2007 dated 30/8/2007 as (AA) External Commercial Borrowings upto USD 20 million per borrowing company per financial year for rupee expenditures for permissible end-use shall require prior approval of the Reserve Bank of India. 7. Substituted vide notification no. 194/2009 dated 17/6/2009 with effect from 8th day of October 2008, before it was read as, Explanation: The following sectors will qualify as infrastructure projects, namely:- i) Power, ii)Telecommunications, iii)Railways, iv)Roads including bridges, v)Ports, vi)Industrial Parks and vii)Urban infrastructure (water supply, sanitation and sewage projects). 8 . Substituted vide notification no. 194/2009 dated 17/6/2009 with effect from 22nd day of October, 2008, before it was read as viii Parking of loan amount abroad The proceeds of borrowings in foreign exchange shall be parked abroad until actual requirement in India. 9. Inserted vide Notification No. FEMA. 246/2012-RB, Dated 27/11/2012 10. Omitted vide Notification No.FEMA.250/2012-RB, dated 6-12-2012 , w.e.f. 26-09-2011 , before it was read as:- (5) No corporate registered under the Companies Act, 1956 shall avail domestic rupee denominated structured obligations credit enhanced by international banks, international financial institutions or joint venture partners, except with the prior approval of the Reserve Bank. 11. Inserted NOTIFICATION No. FEMA 270/2013-RB Mumbai, March 19, 2013 w.e.f. April 20, 2012. 12 . Substituted vide NOTIFICATION No. FEMA 270/2013-RB Mumbai, March 19, 2013 w.e.f. April 20, 2012. before it was read as, (i) Refinancing of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made thereunder, may be made by making fresh borrowing in foreign exchange in accordance with this Schedule provided that there is reduction in cost of borrowing and the outstanding maturity of the original borrowing is not reduced. 13. Substituted vide Notification No. FEMA. 281/2013-RB July 19, 2013 , before it was read as, 7 [Explanation : The following sectors will qualify as infrastructure sectors, namely (i) Power, (ii) Telecommunication, (iii) Railways, (iv) Road including Bridges, (v) Sea Port and Airport (vi) Industrial Parks, (vii) Urban Infrastructure (water supply, sanitation and sewage projects) and (viii) Mining, Exploration and Refining.] 14. Inserted vide Not. 358/2015-RB - Dated 2-12-2015
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