Under the External Commercial Borrowings (ECB) guidelines, the choice of security to be provided to the overseas lender/supplier (for securing ECB) is left to the borrower. However, creation of charge over immoveable assets and financial securities, such as shares, in favour of the overseas lender is subject to specific Regulations of RBI.
As a rationalisation measure, the RBI has considered the proposals for creation of charge on immovable assets, financial securities and issue of corporate or personal guarantees, on behalf of the borrower, in favour of the overseas lender.
As an enabling step it has been decided to allow Authorised Dealer Category I Banks to convey ‘no objection’ under the Foreign Exchange Management Act (FEMA), 1999 for creation of charge on immovable assets, financial securities and issue of corporate/personal guarantees in favour of overseas lender / security trustee, to secure the ECB to be raised by the borrower. All that is needed is for the Banks to satisfy the conditions laid down by RBI, before they issue ‘no objection’.
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