What are the disadvantages of external commercial borrowings?

Disadvantages of External Commercial Borrowing The company could develop a lax attitude as the funds are available at lower rates. Companies could borrow excessively due to this and it could eventually lead to higher debt on the company's balance sheet, thereby adversely affecting financial ratios.

1. What is meant by external commercial borrowings?
2. Who is eligible for external commercial borrowing?
3. What are the components of external commercial borrowings?
4. What do you mean by external commercial borrowings explain the impact of external commercial borrowings on the Indian capital market?
5. Are LLPs eligible to raise ECBs?
6. What are the RBI norms on ECBs?
7. What is the meaning of commercial borrowings?
8. What is external commercial borrowing and external assistance?
9. What do you mean by external borrowing?
10. How do you get external commercial borrowing in India?
11. What are ECB formalities?
12. Which one of the following is treated as external commercial borrowing?
13. Can Nbfcs raise ECB?
14. Why do we need to know the external debts of our country?
15. Can Indian banks raise ECB?

What is meant by external commercial borrowings?

External Commercial Borrowings (ECB) refers to the debt shouldered by an eligible entity in India for solely commercial purposes, that has been extended by external sources, i.e. from any recognized entity outside India. These borrowings are expected to conform to norms and conditions put forth by the RBI.

Who is eligible for external commercial borrowing?

Direct foreign equity holder holding a minimum 25% equity in the borrowing company. Indirect foreign equity holder holding a minimum 51% equity in the borrowing company. Group company with a common overseas parent.

What are the components of external commercial borrowings?

External Commercial Borrowings (ECBs) includes commercial bank loans, buyers' credit, suppliers' credit, securitized instruments such as Floating Rate Notes and Fixed Rate Bonds etc., credit from official export credit agencies and commercial borrowings from Multilateral Financial Institutions.

What do you mean by external commercial borrowings explain the impact of external commercial borrowings on the Indian capital market?

External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian borrowers. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public sector undertakings).

Are LLPs eligible to raise ECBs?

As LLPs are not eligible to receive FDI, they cannot raise ECBs. 6. Can INR denominated ECB be converted into foreign currency ECB?

What are the RBI norms on ECBs?

Change of currency of ECB from one freely convertible foreign currency to any other freely convertible foreign currency as well as to INR is freely permitted. Change of currency from INR to any freely convertible foreign currency is not permitted.

What is the meaning of commercial borrowings?

Definition: The External Commercial Borrowings or ECBs is the financial instrument used to borrow money from the foreign sources of financing to invest in the commercial activities of the domestic country.

What is external commercial borrowing and external assistance?

This takes two forms: ADVERTISEMENTS: (i) External assistance which means borrowing from foreign countries under concessional rate of interest; (ii) Commercial borrowing under which the Indian Government and the Private sector borrow funds from world money market at higher market rate of interest.

What do you mean by external borrowing?

Definition: It refers to money borrowed from a source outside the country. External debt has to be paid back in the currency in which it is borrowed.

How do you get external commercial borrowing in India?

The ECBs can be obtained through automatic route or approval route or by combination of both the routes. Monitored by RBI, ECB is a facility made available to Indian eligible entities to be able to seek huge investment from outside India and allow for foreign capital flow in India.

What are ECB formalities?

Under automatic route –

The initial documentation includes filling form ECB, making loan agreement, making average maturity, repayment and interest payment schedule and request letter. These documents need to be vetted by the CA/CS of the borrowing company and submitted to the AD bank.

Which one of the following is treated as external commercial borrowing?

(a) External Commercial Borrowings (ECB) refer to commercial loans [in the form of bank loans, buyers' credit, suppliers' credit, securitised instruments (e.g. floating rate notes and fixed rate bonds)] availed from non-resident lenders with minimum average maturity of 3 years.

Can Nbfcs raise ECB?

Therefore, Fintech and other NBFC companies would be allowed to raise ECBs from Chinese investors to meet the working capital requirement in India. It is only the end-use of the ECB funds and other RBI regulatory conditions that will be applicable.

Why do we need to know the external debts of our country?

Primary foreign debt markets are important because this is where countries seeking to attract capital must come and get priced. Even when governments do not need external finance, they are said to access these markets in order to provide a benchmark to other domestic borrowers.

Can Indian banks raise ECB?

Indian banks are not permitted to raise ECB. They can act as ECB lenders (through their overseas branches / subsidiaries) only under Track I of the ECB framework duly ensuring that the applicable prudential norms are complied with. They are, however, not permitted to refinance existing ECBs.