RBI Permits Startups to Raise $3 Million Via ECBs Annually (Download PDF)

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RBI (Reserve Bank of India) increased the external commercial borrowings (ECBs) of startups by $3 million in a financial year for 3-year period. This is to improve innovation and promoting job creation in India.

Image of Reserve Bank of India

Image of Reserve Bank of India

Image of Reserve Bank of India

Key Aspects

  • To increase the foreign borrowings with minimum restrictions
  • To increase the overseas funds in rupees as well as in foreign currency.
  • Non-resident lender should mobilise INR through swaps sale started through bank in India for borrowing in INR.
  • The funds can be increased with a minimum maturity of 3 years.
  • No restriction on the end use of the funds raised.
  • Borrowing of startups should be denominated in any freely convertible currency or in Indian Rupees (INR) or a combination thereof included in ECB route.
  • ECBs can be increased from a member of Financial Action Task Force (FATF) or through FATF-Style Regional Bodies.

About External Commercial Borrowings (ECBs)

  • ECBs means any money borrowed from foreign sources for financing the commercial activities in India including:

    • Commercial bank loans.
    • Credit from official export credit agencies and commercial borrowings from the private sector
    • Multilateral Financial Institutions including World Bank, AFIC, ADB, CDC etc.
    • Buyers and suppliers credit.
    • Securitized instruments like Floating Rate Notes and Fixed Rate Bonds etc.

ECB is Different from FDI:

ECBs are foreign money other than Equity when Foreign Direct Investment is the foreign money used to finance the Equity Capital.

- Published/Last Modified on: October 28, 2016

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