14.22 ndian onom
(v) ECBs for interest during construction (iv) Introducing a new ECB scheme of
(IDC) that accumulates on a loan during US $10 billion for companies in the
the project execution phase for companies manufacturing and infrastructure sectors;
in the infrastructure sector would be (v) Permitting the Small Industries
permitted. This would be subject to the Development Bank (SIDBI) as an eligible
condition that the IDC is capitalised and borrower for accessing ECB for on-
is part of the project cost. lending to the micro, small and medium
(vi) Renminbi (RMB)—the Chinese currency enterprises (MSMEs); and
—was approved as an acceptable (vi) Permitting the National Housing Bank
currency for raising ECBs subject to/ (NHB)/Housing Finance Companies to
limit of US $ 1 billion within the existing avail themselves of ECBs for financing
ECB ceiling (allowed only through the prospective owners of low cost /affordable
approval route). housing units.
(vii) The existing ECB limits under the (vii) In December 2015, the RBI announced
automatic route were enhanced from a new ECB framework which was more
US $ 500 million to US$ 750 million attuned to the current economic and
for eligible corporates. For borrowers business environment—from regulatory
in the services sector, the limit has been perspective, now, the ECBs will have
enhanced from US$ 100 million to US$ three main clear-cut categories—
200 million and for NGOs engaged in (a) Medium-term foreign currency-
micro-finance activities from the existing denominated ECB;
US$ 5 million to US$ 10 million. (b) Long-term foreign currency-
Till February 2017, the norms for ECB denominated ECB (with minimum
were further simplified and streamlined by the average maturity of 10 years); and
government—major steps taken in this regard (c) Indian rupee-denominated ECB.
were as given below:
The new lenders comprise overseas
(i) Enhancing the limit for refinancing rupee regulated financial institutions, sovereign
loans through ECB from 25 per cent to wealth funds, pension funds, insurance
40 per cent for Indian companies in the companies, etc. and has an exhaustive
power sector; list of permissible end-users with only a
(ii) Allowing ECB for capital expenditure on small negative list for long-term foreign
the maintenance and operation of toll currency-denominated ECB and INR-
systems for roads and highways so long denominated ECB.
as they are a part of the original project (viii) In order to facilitate rupee-denominated
subject to certain conditions, and also for borrowing from overseas, the government
low cost housing projects; decided (December 2015) to put in place
(iii) Reducing the withholding tax from 20 a framework for issuance of rupee-
per cent to 5 per cent for a period of three denominated overseas bonds (such bonds
years (July 2012–June 2015) on interest have got a popular tag of the masala
payments on ECBs; bonds).