Western India Regional Council of
The Institute of Chartered Accountants of India

Law Update Details

January 2019 CA. Manoj Shah, CA. Sudha G. Bhushan & CA. Mitesh Majithia

External Commercial Borrowings (ECB) Policy – Review of Hedging Provision

A.P. (DIR Series) Circular No. 15 dated November 26, 2018

It has been decided to reduce the mandatory hedge coverage from 100% to 70% for ECBs raised under Track I of the ECB framework by eligible borrowers given at para 2.4.2(vi) of Master Direction No. 5 dated January 1, 2016 viz. companies in infrastructure sector, Non-Banking Financial Companies-Infrastructure Finance Companies (NBFC-IFCs), NBFCs-Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies (CICs), Housing Finance Companies regulated by the National Housing Bank, Port Trusts constituted under the Major Port Trusts Act, 1963 or Indian Ports Act, 1908, for a maturity period of 3 to 5 years.

It is also clarified that ECBs falling within the aforesaid scope but raised prior to the date of this circular will be required to mandatorily roll-over their existing hedge(s) only to the extent of 70% of outstanding ECB exposure.

Gist of selected Compounding Orders passed by Reserve Bank of India

Sr. No.

Subject Matter

Contraventions Compounded


Foreign Direct Investment – FEMA Notification No. 20

The applicant company was engaged in business of wholesale trading in India and providing maintenance services in relation to eye care products. The company had 100% FDI. It carried out financial leasing of Opthalmic Surgical Equipment (through wholesale trading), from March 2006 to October 2015.

A company having foreign investment and engaged in financial leasing was required to meet the minimum capitalization norms, which the applicant company failed to do, thus contravening Regulation 5(1) read with Annexure B of Schedule I of Notification No. FEMA 20/2000RB.


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