In exercise
of the powers conferred by clauses (a), (d) and (e) of Sub-Section (3) of
Section 6, sub-section (2) of Section 47 of the Foreign Exchange Management
Act, 1999 (42 of 1999) and in supersession of Notification No. FEMA. 3/2000RB
dated May 3, 2000, as amended from time to time, Notification No. FEMA. 4/2000-
RB dated May 3, 2000, as amended from time to time and Regulation 21 of
Notification No. FEMA. 120/RB-2004 dated July 7, 2004 as amended from time to
time, the Reserve Bank makes the following regulations for borrowing and
lending between a person resident in India and a person resident outside India,
namely: (i) These Regulations
may be called the Foreign Exchange Management (Borrowing and Lending)
Regulations, 2018. (ii) They shall come
into force from the date of their publication in the Official Gazette. In these regulations, unless the
context otherwise requires - (i) "Act"
means the Foreign Exchange Management Act, 1999 (42 of 1999); (ii) "Authorised
Dealer (AD)" means a person authorised as an Authorised Dealer under
sub-section (1) of section 10 of the Act; (iii) "EEFC
Account", "RFC Account" shall have the same meaning as assigned
to them respectively in the Foreign Exchange Management (Foreign Currency
Accounts by a person resident in India) Regulations, 2015, as amended from time
to time; (iv) "External
Commercial Borrowings (ECB)" means borrowing by an eligible resident
entity from outside India in accordance with framework decided by the Reserve
Bank in consultation with the Government of India; (v) "External
Commercial Lending (ECL)" means lending by a person resident in India to a
borrower outside India in accordance with framework decided by the Reserve
Bank in consultation with the Government of India (vi) "Foreign
Exchange" shall have the same meaning assigned to it in the Act; (vii) "Foreign
branches/subsidiaries of the Indian banks" means entities established
overseas in terms of provisions contained in the Banking Regulation Act, 1949,
as amended from time to time; (viii) 'Authorised
Bank', 'Non-resident Indian (NRI)', 'FCNR (B) Account', 'NRO Account', and 'NRE
Account' shall have the same meanings as assigned to them respectively in the
Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time
to time; (ix) "Housing
Finance Institution" and "National Housing Bank" shall have the
same meaning as assigned to them in the National Housing Bank Act, 1987, as
amended from time to time; (x) "Indian
Entity" means a company incorporated in India under the Companies Act,
2013, as amended from time to time, or a Limited Liability Partnership
formed and registered in India under the Limited Liability Partnership Act,
2008, as amended from time to time; (xi) "Overseas
Citizen of India (OCI)" Cardholder shall have the same meaning as assigned
to it under Section 7(A) of the Citizenship Act, 1955, as amended from time to
time; (xii) "Real Estate
Activity" means any activity involving own or leased property for buying,
selling and renting of commercial and residential properties or land and also
includes activities either on a fee or contract basis assigning real estate
agents for intermediating in buying, selling, letting or managing real estate.
However, this would not include development of integrated township, purchase/
long term leasing of industrial land as part of new project/modernisation or
expansion of existing units or any activity under 'infrastructure sub-sectors'
as given in the Harmonised Master List of Infrastructure sub-sectors approved
by the Government of India vide Notification F. No. 13/06/2009-INF, as amended/
updated from time to time; (xiii) "Relative"
shall have the same meaning as assigned to it in the Companies Act, 2013, as
amended from time to time; (xiv) "Restricted
End Uses" shall mean end uses where borrowed funds cannot be deployed and
shall include the following: (a) In the business
of chit fund or Nidhi Company; (b) Investment in
capital market including margin trading and derivatives; (c) Agricultural or
plantation activities; (d) Real estate
activity or construction of farm houses; and (e) Trading in
Transferrable Development Rights (TDR), where TDR shall have the meaning as
assigned to it in the Foreign Exchange Management (Permissible Capital Account
Transactions) Regulations, 2015. (xv) "Schedule"
means the Schedule to these Regulations; (xvi) "Start-up"
means an entity which complies with the conditions laid down in Notification
No. G.S.R 180(E) dated February 17, 2016, as amended/updated from time to time,
issued by Department of Industrial Policy and Promotion, Ministry of Commerce
and Industry, Government of India; (xvii) "Trade
Credit" refer to the credits extended by the overseas supplier, bank /financial
institution for imports into India in accordance with the Trade Credit
framework decided by the Reserve Bank in consultation with the Government of
India; Explanation: Depending on the source
of finance, such trade credits include both suppliers' credit and buyers'
credit. Suppliers' credit relates to the credit for imports into India extended
by the overseas supplier, while buyers' credit refers to loans for payment of
imports into India arranged by the importer from overseas bank or financial
institution. Imports should be as permissible under the extant Foreign Trade
Policy of the Director General of Foreign Trade (DGFT). (xviii) The words and
expressions used but not defined in these Regulations shall have the same
meaning respectively assigned to them in the Act. Save as otherwise provided in the Act,
Rules or Regulations made thereunder, no person resident in India shall borrow
or lend in foreign exchange from or to a person resident in or outside India
and no person resident in India shall borrow in rupees from, or lend in rupees
to, a person resident outside India: Provided that the Reserve Bank may,
for sufficient reasons, permit a person resident in India to borrow or lend in
foreign exchange from or to a person resident in or outside India and/or permit
a person resident in India to borrow in rupees from, or lend in rupees to, a
person resident outside India. Explanation: Use of Credit Card (a) in
India by a person resident outside India or (b) outside India by a person
resident in India shall not be deemed as borrowing or lending in Indian
Rupee/foreign exchange. (A) Borrowing by an
Authorised Dealer or its branch outside India (i) An AD may borrow
from its Head Office or branch or correspondent outside India or any other
entity up to limit specified and subject to terms and conditions as specified
by the Reserve Bank from time to time, in consultation with Government of
India. (ii) A branch outside
India of an AD being a bank incorporated or constituted in India, may borrow in
foreign exchange in the normal course of its banking business from outside
India, subject to the directions or guidelines issued by the Reserve Bank from
time to time, and the Regulatory Authority of the country where the branch is
located. (iii) An AD may borrow
in foreign exchange from a bank or a financial institution outside India, for
the purpose of granting pre-shipment or post-shipment credit in foreign
exchange to its exporter constituent, subject to compliance with the guidelines
issued by the Reserve Bank in this regard. (iv) An AD may raise
ECB from outside India in accordance with the provisions contained in Schedule
I. (B) Borrowing by
Persons other than Authorised Dealers (i) Eligible resident
entities may raise ECB from outside India in accordance with the provisions
contained in Schedule I. (ii) Trade Credit may
be raised from outside India by importers for import of capital or non-capital
goods as permissible under the extant Foreign Trade Policy of the DGFT in
accordance with the provisions contained in Schedule II. (iii) A person resident
in India may borrow, whether by way of loan or overdraft or any other credit
facility, from a bank situated outside India, where export of goods or services
is proposed to be made on deferred payment terms or in execution of a turnkey
project or a civil construction contract, provided the terms and conditions
stipulated by the authority which has granted the approval to the arrangement
are in accordance with the Foreign Exchange Management (Export of goods and
services) Regulations, 2015, notified vide Notification No. FEMA.23(R)/2015-RB
dated January 12, 2016, as amended from time to time. (iv) Financial
Institutions, set up under an Act of the Indian Parliament, may raise foreign
exchange borrowings with the prior approval of the Government of India for the
purpose of onward lending. Explanation: Such borrowings, which
are in the nature of ECB, shall be subject to provisions contained in Schedule
I. subject to such terms and conditions as specified by the Reserve Bank
from time to time in consultation with the Government of India. (v) An individual
resident in India studying abroad may raise loan outside India not exceeding
USD 250,000/- or its equivalent, or any other amount as decided by the Reserve
Bank from time to time, for the purposes of payment of education fees abroad
and maintenance subject to terms and conditions as specified by the Reserve
Bank from time to time in consultation with the Government of India. (A) Lending by an
Authorised Dealer in India or its branch outside India (i) An AD in India or
its branch outside India may extend foreign currency denominated ECL to a
borrower outside India in accordance with the provisions contained in Schedule
III. (ii) An AD may grant
loans to its constituents in India for meeting their foreign exchange
requirements or for their rupee working capital requirements or capital
expenditure subject to compliance with prudential norms, interest rate
directives and guidelines, if any, issued by Reserve Bank in this regard. (iii) Subject to the
directions or guidelines issued by the Reserve Bank from time to time, an AD in
India may extend foreign exchange loans to another AD in India. (iv) Branches outside
India of AD banks may extend foreign exchange loans against the security of
funds held in NRE/ FCNR deposit accounts or any other account as specified by
the Reserve Bank from time to time, maintained in accordance with the Foreign
Exchange Management (Deposit) Regulations, 2016, notified vide Notification No.
FEMA 5(R)/2016-RB dated April 1, 2016, as amended from time to time. (B) Lending by
persons other than Authorised Dealer Eligible resident entity may extend
foreign currency denominated ECL to a borrower outside India in accordance with
the provisions contained in Schedule III. (A) Borrowing by an
Authorised Dealer An AD may raise Rupee denominated ECB
from outside India in accordance with the provisions contained in Schedule I. (B) Borrowing by
persons other than Authorised Dealer (i) Eligible resident
entities may raise Rupee denominated ECB from outside India in accordance with
the provisions contained in Schedule I. (ii) Eligible resident
entities, as defined by the Government of India, may borrow from overseas
Multilateral Financial Institutions/International Development Financial
Institutions, where the source of funds of such institutions is Rupee
denominated bonds issued overseas or resources raised domestically, or any
other source as approved by the Government of India. (iii) Trade Credit may
be raised from outside India in Indian Rupees by importers for import of capital
or non-capital goods as permissible under the extant Foreign Trade Policy of
the DGFT in accordance with the provisions contained in Schedule II. (iv) Any foreign
investment in the nature of debt arising out of transfer or issue of security,
not covered under the above sub-regulations, should be in compliance with
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2017, notified vide Notification No. FEMA 20(R)/
2017-RB dated November 07, 2017, as amended from time to time. (v) Any person
resident in India accepting any deposit from, or making any deposit with, a
person resident outside India, including loans/ overdrafts against security of
funds held in such accounts, should be in compliance with Foreign Exchange
Management (Deposit) Regulations, 2016, notified vide Notification No. FEMA
5(R)/2016-RB dated April 1, 2016, as amended from time to time. (vi) A person resident
in India, not being a company incorporated in India, may borrow in Indian
Rupees from a NRI/Relatives who are OCI Cardholders outside India, subject to
such terms and conditions as specified by the Reserve Bank from time to time in
consultation with the Government of India. The borrower should ensure that the
borrowed funds are not used for restricted end uses. (vii) Financial
Institutions, set up under an Act of the Indian Parliament, may raise Rupee
denominated borrowings from outside India with the prior approval of the
Government of India for the purpose of onward lending. Explanation: Such borrowings which are
in the nature of ECBs shall be subject to provisions contained in Schedule I. (A) Lending by an
Authorised Dealer (i) An AD in India
may grant loan to a NRI/OCI Cardholder for meeting the borrower's personal
requirements/own business purposes/acquisition of a residential accommodation
in India/ acquisition of motor vehicle in India / or for any purpose as per the
loan policy laid down by the Board of Directors of the AD and in compliance
with prudential guidelines of Reserve Bank of India. The AD bank should ensure
that the borrowed funds are not used for restricted end uses. (ii) Overdraft in
rupee account maintained with AD in India by a bank outside India: An AD may
permit a temporary overdraft, for value not exceeding Rupees 5 billion or any
other amount as prescribed by the Reserve Bank from time to time, in rupee
accounts maintained with it by its overseas branch or correspondent or Head
Office outside India, subject to such terms and conditions as the Reserve Bank
may direct from time to time. [1][(iii) An AD in
India may lend to a person resident outside India for making margin payments in
respect of settlement of transactions involving Government Securities by the
person resident outside India, subject to such terms and conditions as may be
specified by the Reserve Bank. Explanation: The expression
'Government Security' shall have the same meaning as assigned to it in Section 2(f) of
Government Securities Act, 2006, and the word 'securities' shall be construed
accordingly.] (B) Lending by
persons other than Authorised Dealer (i) A registered
non-banking financial company in India or a registered housing finance
institution in India or any other financial institution as may be
specified by the Reserve Bank from time to time, may provide housing loan or
vehicle loan, as the case may be, to a NRI/OCI Cardholder subject to such terms
and conditions as prescribed by the Reserve Bank from time to time. The
borrower should ensure that the borrowed funds are not used for restricted end
uses. (ii) An Indian entity
may grant loan in Indian Rupees to its employee who is a NRI/OCI Cardholder in
accordance with the Staff Welfare Scheme subject to such terms and conditions
as prescribed by the Reserve Bank from time to time. The borrower should ensure
that the borrowed funds are not used for restricted end uses. (iii) A resident
individual may grant Rupee loan to a NRI/OCI Cardholder relative within the
overall limit under the Liberalised Remittance Scheme subject to such terms and
conditions as prescribed by the Reserve Bank from time to time. The borrower
should ensure that the borrowed funds are not used for restricted end uses. A person resident outside India may
undertake repo or reverse repo transactions in Rupees to borrow or lend money,
subject to such terms and conditions as may be specified by the Reserve Bank. Explanation: Repo shall have the same meaning as
defined in Section 45U (c) of RBI Act, 1934 Reverse Repo shall have the same
meaning as defined in Section 45U (d) of RBI Act, 1934.][2] (i) An authorised
dealer/authorised bank, may allow continuance of loans granted to a resident
individual who subsequently becomes a person resident outside India, subject to
such terms and conditions as specified by the Reserve Bank from time to time. (ii) In case a loan
was granted by a resident individual to another resident individual and the
lender subsequently becomes a non-resident, the repayment of the loan by the
resident borrower should be made by credit to the NRO account or any other
account of the lender maintained with a bank in India as specified by the
Reserve Bank from time to time, at the option of the lender. (iii) In case a loan
was granted by a NRI/OCI Cardholder to a person resident in India in accordance
with the provisions contained in these regulations and the lender subsequently
becomes a resident, the repayment of the loan may be made to the designated
account of the lender maintained with a bank in India as specified by the
Reserve Bank from time to time, at the option of the lender. (iv) A resident
individual will be permitted to service loans taken overseas earlier as a
person resident outside India subject to terms and conditions and limit as
specified by the Reserve Bank from time to time. Any borrowing under erstwhile
regulations can be continued as permitted up to the due date of
repayment. [See Regulations 4(A)(iv), 4(B)(i), 4(B)(iv), 6(A),
6(B)(i), 6(B)(vii)] Borrowings from outside India by a person resident in India Eligible entities may raise External
Commercial Borrowings (ECB) from outside India in accordance with the
provisions contained in this Schedule. (1) Currency of
borrowing ECB can be raised in any freely
convertible foreign currency as well as in Indian Rupees or any other currency
as specified by the Reserve Bank in consultation with the Government of India. (2) Forms ECB can be raised in the forms as
prescribed by the Reserve Bank in consultation with the Government of India.
Certain hybrid instruments, such as optionally convertible debentures,
presently covered under ECB, would be governed by specific hybrid instruments'
Regulations when notified by the Government of India. (3) Eligibility of
borrowers All entities eligible to receive
foreign direct investment, in terms of Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident Outside India) Regulations, 2017,
notified vide Notification No. FEMA 20(R)/ 2017-RB dated November 07, 2017, as
amended from time to time, including Start-ups. Further, Reserve Bank, in
consultation with the Government of India may specify any other entity/sector
eligible to raise ECBs or amend the existing eligibility norms. (4) Maturity Minimum average maturity will be 3
years. However, Reserve Bank, in consultation with Government of India may
prescribe minimum average maturity stipulation for ECBs raised by entities in
certain sectors or for certain amount of ECB or for certain end uses or for
borrowing from certain recognised lenders. (5) Lenders: The lender should be resident of FATF
or IOSCO compliant country as defined in the ECB policy, including on transfer
of ECBs. However, Multilateral and Regional Financial Institutions where India
is a member country will also be considered as recognised lenders. Further,
Reserve Bank, in consultation with the Government of India may specify any
other lender/set of lenders under the schedule or amend the existing
provisions. Explanation: Foreign branches /
subsidiaries of Indian banks are permitted as recognised lenders only for ECBs
raised in foreign exchange. (6) All-in-cost (i) For ECBs raised
in foreign exchange, the maximum spread over the benchmark of 6-month LIBOR or
applicable benchmark for the respective currency will be 450 basis points per
annum or as prescribed by the Reserve Bank in consultation with the Government
of India. (ii) For ECBs raised
in Indian Rupees, the maximum spread will be 450 basis points per annum over
the prevailing yield of the Government of India securities of corresponding
maturity or as prescribed by the Reserve Bank in consultation with the
Government of India. (7) End-uses The proceeds of borrowing raised from
outside India in terms of this Schedule can be used for all purposes except for
those activities prescribed in the negative end-use list by the Reserve Bank in
consultation with the Government of India. (8) Individual Limits
of borrowing All eligible borrowers/category of
borrowers may raise ECB of up to USD 750 million or equivalent per financial
year. For Startups the amount would be limited to USD 3 million or equivalent
per financial year. However, Reserve Bank, in consultation with Government of
India may prescribe higher limits for ECBs raised by entities in certain
sectors or for certain end uses. The said individual limits may be subject to
review by the Reserve Bank in consultation with the Government of India. [3][8A: The limit of
USD 750 million or equivalent per financial year is temporarily increased to
USD 1500 million or equivalent. This dispensation will be available for ECBs
raised till December 31, 2022.] (9) Security The borrower covered in this Schedule
may provide security to the lender / suppliers, as specified by the Reserve
Bank from time to time in terms of these regulations or under any other
Regulations framed under the Act. The borrower may also provide corporate and /
or personal guarantee as security for the borrowing, subject to terms and
conditions as specified by the Reserve Bank from time to time. However, banks,
financial institutions and Non-Banking Finance Companies shall not provide
(issue) any type of guarantee in favour of overseas lender on behalf of their
constituents for their borrowings under this Schedule, except in accordance
with specific stipulations made by the Reserve Bank. (10) Parking of loan
amount abroad The proceeds of borrowings under this
Schedule may, pending utilisation for permissible end-uses, be parked abroad or
in India as per the directions issued by the Reserve Bank from time to time. (11) Drawal of Loan Draw-downs of borrowing under this
Schedule shall be made only after obtaining the loan registration number from
the Reserve Bank or from the ADs, as per the system put in place by the Reserve
Bank. For non-adherence, the borrower may be required to pay penalty as
specified by the Reserve Bank from time to time. Provided that non-payment of penalty
as above shall be treated as a contravention and shall be subject to
compounding or adjudication as provided in the Act or Rules framed thereunder. (12) Reporting The borrower shall adhere to the
reporting procedure as specified by the Reserve Bank from time to time. For nonadherence,
the borrower may be required to pay penalty as specified by the Reserve Bank
from time to time. Provided that non-payment of penalty
as above shall be treated as a contravention and shall be subject to
compounding or adjudication as provided in the Act or Rules framed thereunder. (13) Debt Servicing The designated AD shall have the
general permission to make remittances of principal, interest and other charges
in conformity with the guidelines on borrowing under this Schedule. (14) Hedging Reserve Bank, in consultation with the
Government of India, may stipulate hedging requirements for borrowings under
this schedule. (15) Available routes
for raising ECB All ECBs can be raised under the
automatic route if it conforms to the parameters prescribed under this Schedule
and subject to specified reporting conditions. All other cases will be
considered by RBI under the approval route. [See Regulations 4(B)(ii) & 6(B)(iii)] Trade Credit for Imports Importers may raise trade credits from
outside India in accordance with the provisions contained in this Schedule. (1)
Purpose Trade Credits can be raised for the purpose
of import of non-capital and capital goods as permitted under the extant
Foreign Trade Policy of the DGFT and for purchase of non-capital and capital
goods within a Special Economic Zone (SEZ) or from a different SEZ subject to
terms and conditions as stipulated by the Reserve Bank from time to time. Explanation: SEZ is as defined in the SEZ
Act, 2005. (2)
Currency of borrowing Trade credits can be raised in any freely
convertible foreign currency as well as in Indian Rupees or any other currency
as specified by the Reserve Bank in consultation with the Government of India. (3)
Amount of borrowing Importers can raise trade credit up to 50
million equivalent per import transaction for import of capital or non-capital
goods or any other amount as decided by the Reserve Bank in consultation with
the Government of India. (4)
Period The period of trade credit reckoned from the
date of shipment shall be as under: (i)
For import of non-capital goods - Maximum
period of up to one year and linked with the operating cycle, or for a period
as per the guidelines issued by the Reserve Bank from time to time for any
import of any goods / for import by any specific sector. (ii)
For import of capital goods - Maximum period
of three years or for a period as per the guidelines issued by the Reserve Bank
from time to time. (5)
Recognised Lenders Overseas suppliers, banks and other financial
institutions, foreign equity holders and financial institutions in
International Financial Services Centres (IFSCs) in India or any other entities
as decided by the Reserve Bank in consultation with the Government of India. (6)
Cost: (i)
For trade credits in foreign exchange, the
maximum spread over the benchmark of 6-month LIBOR or applicable benchmark
for the respective currency will be 250 basis points per annum or as prescribed
by the Reserve Bank in consultation with the Government of India. (ii)
For Rupee denominated trade credit, the
all-in-cost shall be commensurate with prevailing market conditions or as
prescribed by the Reserve Bank in consultation with the Government of India. (7)
Security and guarantee The borrower covered in this Schedule may
provide security to the lender / suppliers, as specified by the Reserve Bank
from time to time in terms of these regulations or under any other Regulations
framed under the Act. The borrower may also provide corporate and / or personal
guarantee as security for the borrowing subject to terms and conditions as
specified by the Reserve Bank from time to time. Further, AD Category I banks
are permitted to issue bank guarantees in favour of overseas supplier, bank or
financial institution duly ensuring the underlying import /trade credit
complies with extant norms. (8)
Reporting requirements The reporting requirement and procedure will
be as specified by the Reserve Bank from time to time. [See Regulations 5(A)(i), 5(B)] Lending to borrowers outside India by a person resident
in India Eligible entities may extend External
Commercial Lending (ECL) to borrowers outside India in accordance with the
provisions contained in this Schedule. (1)
An AD in India may extend External Commercial
Lending (ECL) in foreign exchange to a foreign entity in which an Indian entity
has made overseas direct investment in accordance with Foreign Exchange
Management (Transfer or Issue of any Foreign Security) Regulations, 2004, as
amended from time to time. (2)
Foreign branches of the Indian banks may extend
foreign exchange loans in the normal course of their banking business outside
India. (3)
An eligible entity, as defined under Foreign
Exchange (Transfer or Issue of any Foreign Security) Regulations, 2004,
notified vide Notification No.FEMA.120/RB-2004 dated July 7, 2004, as amended
from time to time, may lend in foreign exchange to a foreign entity in which it
has made direct investment in accordance with the provisions under the said
regulations. (4)
A person resident in India may lend in
foreign exchange out of funds held in his/her EEFC account, for trade related
purposes to his/her overseas importer customer subject to such terms and
conditions as stipulated by the Reserve Bank of India from time to time in
consultation with Government of India. (5)
Indian companies may grant loans in foreign
exchange to the employees of their branches outside India for personal purposes
provided that the loan shall be granted for personal purposes in accordance
with the lender's Staff Welfare Scheme / Loan Rules and other terms and
conditions as applicable to its staff resident in India and abroad. [1] Inserted by Drugs and Cosmetics (Amendment)
Rules, 2021 vide Notification No. GSR202(E) dated 22.03.2021. [2] Inserted by the Foreign Exchange Management
(Borrowing and Lending) (Amendment) Regulations, 2019 vide Notification No.
GSR163(E) dated 26.02.2019. [3] Inserted by Foreign Exchange
Management (Borrowing and Lending) (Third Amendment) Regulations, 2022
vide Notification No. FEMA.03(R)(3)/2022-RB dated 28.07.2022.FOREIGN EXCHANGE MANAGEMENT (BORROWING AND LENDING)
REGULATIONS, 2018 [AMENDED UPTO 2022]
PREAMBLE