External commercial Borrowings (ECBs) are a key component of India’s overall debt. Policy on External commercial Borrowings (ECB) is framed by the Government of India in consultation with RBI. For the convenience of investors and borrowers, Government bring out the consolidated ECB Guidelines in the form of a brochure and this is the fifth publication in the series. The last consolidated ECB Guidelines were brought out in July, 1999. This brochure includes changes in the ECB Guidelines for the year 2005-2006.

The important aspect of ECB policy is to provide flexibility in borrowings by Indian corporates, at the same time maintaining prudent limits for total external borrowings. The guiding principles of ECB policy are to keep borrowing maturities long, costs low, and encourage infrastructure and export sector financing which are crucial for overall growth of the economy.

Government has been streamlining / liberalising ECB procedures in order to enable Indian corporates, to have greater access to international financial markets. Government has now empowered Reserve Bank of India to give ECB approvals in accordance with the guidelines brought out by the RBI. Corporates are eligible to raise ECB for investment (such as import of capital goods, new projects, modernization/expansion of existing production units) in real sector - industrial sector including small and medium enterprises (SME) and infrastructure sector - in India. Infrastructure sector is also permitted to obtain credit enhancements from international banks/international financial institutions/joint venture partners for their domestic rupee denominated borrowing under structural obligations scheme with the approval of RBI. ECB proceeds can also be utilised for overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad; The ECB guidelines are regularly reviewed in consultation with the Reserve Bank of India (RBI) keeping in view the current macroeconomic situation and in consistence with prudent debt management.. The Government last amended the policy on External Commercial Borrowings (ECB) in March, 2005 in the background of developments in recent months. Accordingly, this brochure contains the consolidated guidelines including recent changes in the policy.