Pursuant to a circular dated 7 September 2011 (“Circular“) issued by the Reserve Bank of India (“RBI“), the RBI has simplified the procedure to change the lender of an existing External Commercial Borrowing (“ECB“).
Before issue of the Circular, borrowers were required to apply to authorized dealer banks, which turn were required to forward the application to the RBI for approval. Pursuant to the Circular, the RBI has delegated the power to approve such applications to AD Category-1 banks, except in case of ECBs the original lender is a foreign equity holder or collaborator. ECBs where the original lender is a foreign equity holder or collaborator will continue to be approved by the RBI.
The approval by AD Category-I bank for change in lender is subject to the following conditions:
(a) the new proposed lender must be a “recognized lender” in terms of ECB regulations;
(b) the ECB must comply with existing guidelines; and
(c) there must be no change to the terms of the ECB.