Foreign Exchange Management ( Borrowing or lending in foreign exchange) Regulations, 2000

[G.S.R. 386(E)]

In exercise of the powers conferred by clause (d) of Sub-Section (3) of Section 6, sub- section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the following regulations for borrowing or lending in foreign exchange by a person resident in India; namely :-

(i)

These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000.

(ii)

They shall come into force on 1st day of June, 2000.

2.

In these regulations, unless the context otherwise requires -

a)

'Act' means the Foreign Exchange Management Act, 1999 (42 of 1999);.

b)

'authorised dealer' means a person authorised as an authorised dealer under sub- section (1) of section 10 of the Act; 

c)

'EEFC account', 'RFC account' mean the accounts referred to in the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000;

d)

'FCNR (B) account', 'NRE account' mean the accounts referred to in the Foreign Exchange Management (Deposit) Regulations, 2000;

e)

'Indian entity' means a company or a body corporate or a firm in India;

f)

'Joint Venture abroad' means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity;

g)

'Schedule' means the Schedule to these Regulations;

h)

'Wholly owned subsidiary abroad' means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and whose entire capital is owned by an Indian entity;

i)

the words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.

3.

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:

Provided that the Reserve Bank may, for sufficient reasons, permit a person to borrow or lend in foreign exchange from or to a person resident outside India.

(1)

An authorised dealer in India or his branch outside India may lend in foreign currency in the circumstances and subject to the conditions mentioned below, namely:

i)

A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may extend foreign currency loans in the normal course of its banking business outside India;

ii)

An authorised dealer may grant loans to his 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)

An authorised dealer may extend credit facilities to a wholly owned subsidiary abroad or a joint venture abroad of an Indian entity;

Provided that not less than 51 per cent of equity in such subsidiary or joint venture is held by the Indian entity subject to compliance with the Foreign Exchange Management (Transfer and Issue of Foreign Security) Regulations, 2000;

iv)

An authorised dealer may, in his commercial judgment and in compliance with the prudential norms, grant loans in foreign exchange to his constituent maintaining [***]¹RFC Account, against the security of funds held in such account; 

v)

A branch outside India of an authorised dealer may extend foreign currency loans against the security of funds held in NRE/FCNR deposit accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2000. 

vi)

Subject to the directions or guidelines issued by the Reserve Bank from time to time, an authorised dealer in India may extend foreign currency loans to another authorised dealer in India.

vii)⁴

2)

An authorised dealer in India may borrow in foreign currency in the circumstances and subject to the conditions mentioned below, namely:

i)⁴

An authorised dealer may borrow from his Head Office or branch or correspondent outside India upto

 [fifty percent] of his unimpaired Tier I capital or US$ 10 million, whichever is more, subject to such

conditions as the Reserve Bank may direct.  

Explanation: For the purpose of clause (i), the aggregate loans availed of by all branches in India of the authorised dealer from his Head Office, all branches and correspondents outside India, shall be reckoned.

[***]⁴

        ⁴

ii)

A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may borrow in foreign currency in the normal course of its banking business 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.

        ⁴

iii)

An authorised dealer may borrow in foreign currency from a bank or a financial institution outside India, for the purpose of granting pre-shipment or post-shipment credit in foreign currency to his exporter constituent, subject to compliance with the guidelines issued by the Reserve Bank in this regard.

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, for execution outside India of a turnkey project or civil construction contract or in connection with exports on deferred payment terms, provided the terms and conditions stipulated by the authority which has granted the approval to the project or contract or export in accordance with the Foreign Exchange Management (Export of goods and services) Regulations, 2000.