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

(Setup by an Act of Parliament)

August 23, 2019

CA. Manoj Shah, CA. Sudha G. Bhushan, CA. Mitesh Majithia

Rationalisation of End-use Provisions of External Commercial Borrowings (ECB) Policy

A.P. (DIR Series) Circular No.04 dated July 30, 2019

As per the existing ECB Policy, ECB proceeds cannot be utilized for working capital purposes, general corporate purposes and repayment of rupee loans except when the ECB is availed from foreign equity holder for a minimum average maturity period of 5 years.

However, based on the feedback from stakeholders and with a view to further liberalize the ECB framework, it has been decided, in consultation with Government of India, to relax the end use restrictions.

Accordingly, eligible borrowers will now be permitted to raise ECBs for various purposes mentioned in the aforesaid Circular from recognized lenders, except foreign branches/overseas subsidiaries of Indian Banks subject to paragraph 2.2 (Limits and leverage) of the Master Direction No. 5 dated March 26, 2019.

Please refer aforesaid circular available on RBI website at


Foreign Exchange Management (Deposit) (Amendment) Regulations, 2019 – Acceptance of Deposits by issue of Commercial Papers

A.P. (DIR Series) Circular No.06 dated August 16, 2019 and Notification No. FEMA 5(R)(2)/2019-RB dated July 16, 2019

Regulation 6(3) of Foreign Exchange Management (Deposit) Regulations, 2016 (Deposit Regulations), in terms of which a Company may accept deposits through issue of Commercial Paper (CP), has been reviewed by RBI vis-à-vis other Statutes/Regulations – notably Section 45 U(b) of RBI Act, 1934 describing CP as one of the Money Market Instruments and Section 2(c) of Companies (Acceptance of Deposits), Rules 2014 which excludes any amount received against issue of, inter alia, CPs from definition of deposits. It has also been considered that Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 – FEMA 20(R), already allow investments in CPs issued by the Indian Companies.

Therefore, with a view to bring in consistency in statutory provisions/regulations relating to Commercial Papers (CPs), the RBI has also amended the Deposit Regulations and deleted Regulation 6(3) of FEMA 5(R)/2016-RB vide Notification No. FEMA 5(R)(2)/2019-RB dated July 16, 2019.

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