On 1 January, the Reserve Bank of India (RBI) amended the regulations for external commercial borrowings (ECB) to liberalize and expand the options of securities and consolidate various provisions related to creation of charges to secure ECBs.
The new rules state that authorized dealer category-I banks may allow the creation of charges on immovable assets, movable assets, financial securities and issue of corporate and/or personal guarantees in favour of overseas lenders/security trustees, subject to the banks satisfying themselves that the security creation: (a) is in compliance with existing foreign exchange norms; (b) is required to be created under the loan document; and (c) that a no objection certificate from the existing lenders in India has been obtained.
Some of the conditions to be met for the creation of security are as follows:
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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bangalore, Singapore, Silicon Valley and Munich. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.
