ECB facility for Resolution Applicants under Corporate Insolvency Resolution Process (CIRP)

Reserve Bank of India (RBI) vide RBI/2018-19/121 A.P. (DIR Series) Circular No. 18 dated 7th February 2019 have relaxed the end-use restrictions for resolution applicants under the Corporate Insolvency Resolution Process (CIRP).

As per ECB policy framework dated 16th January 2019, end use (negative list) of the ECB proceeds has been defined as follows:

• Real estate activities.
• Investment in capital market
• Equity investment
• Working capital purposes except from foreign equity holder
• General corporate purposes except from foreign equity holder
• Repayment of Rupee loans except from foreign equity holder
• On-lending to entities for the above activities

Highlights of the amendment include:

• For the above highlighted point, it has been clarified that resolution applicants under the Corporate Insolvency Resolution Process (CIRP) can raise ECBs from the recognised lenders (as defined under New ECB policy) for repayment of Rupee term loans of the target company under the approval route. But they cannot raise such ECBs from branches/ overseas subsidiaries of Indian banks. 

• Accordingly the resolution applicants, who are otherwise eligible borrowers, can forward such proposals to raise ECBs, through their AD bank, to Foreign Exchange Department, Central Office, Mumbai of the Reserve Bank for approval. 

• All other provisions of the ECB policy remain unchanged.