Regulations fine-tuned for external commercial loans

By Bhumika Tripathi, Khaitan Sud & Partners
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The Reserve Bank of India (RBI), with a view to liberalizing the external commercial borrowing (ECB) norms, has introduced changes to the extant norms, which entered into force with immediate effect. The changes expanded the options of securities and consolidated various provisions related to creation of charge over securities for ECB.

Bhumika Tripathi
Bhumika Tripathi

Security for ECB

Previously, the choice of security to be provided to the overseas lender/supplier for securing ECB was left to the borrower. From now on, the authorized dealer (AD) Category-I banks may allow creation of charge on immovable assets, movable assets and financial securities, and issue of corporate and/or personal guarantees in favour of an overseas lender/security trustee, to secure the ECB raised or to be raised by the borrower. (ADs are authorized by the RBI to deal in foreign exchange or in foreign securities).

Security over movable assets (which, in India, is typically created by way of hypothecation) is now identified under these norms, expanding the options of securities available to an ECB lender.

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Khaitan Sud & Partners is a fast growing law firm providing specialist legal services to both domestic and international clients. Bhumika Tripathi is an associate at the firm.

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Khaitan Sud & Partners

D-41, Defence Colony

New Delhi – 110024

India

Tel: +91 11 41552824-25

Fax: +91 11 41510266

Email: tanuj.sud@kspartners.co.in

www.kspartners.co.in

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