6 O    is the long term financing of
infrastructure and industrial projects based upon the
projected cash flows of the project rather than the
balance sheets of the project sponsors.
6 Sponsors has to think these things:
6 Cost of the Project
6 Cash inflows to repay that project which is financed
6 Risk Involved in the project
6 Those sources of funds which are raised from the
domestic market are called as internal sources they
are:
6 Reserves and Surplus
6 Shares
6 Debentures
6 Bonds
6 Venture Capital Markets
6 Etcǥ
6 |DRs- |merican Depository Receipts
6 GDRs- Global Depository Receipts
6 ECBs - External Commercial Borrowings
6 FCCBȂ Foreign Currency Convertible Bonds
6 FCEBs-Foreign Currency Exchange Bonds
6 Etcǥ.
6 | source of funds for financing expansion of existing
capacity and for fresh investment out of territory
6 External Commercial Borrowings (ECB) refer to
commercial loans availed from non-resident lenders
6 It Includes:
6 Commercial Bank Loans
6 Buyersǯ Credit
6 Suppliers Credit
6 Securitized Instruments
6 Credit from Export Credit agencies
6 Fixed rate bonds
6 Scarcity of Funds in Domestic
Market.

6 Cheaper than Domestic Debt.

6 Regulated under Section 6, Sub Section3 of FEM|
(Foreign Exchange Management |ct) 1999

6 Policies:
6 Permitted by the Government as a source of finance
for Corporate to expand their existing capacity & for
fresh investment
6 Greater priority for projects in the infrastructure,
Power, oil, telecom, railways, Roads & Bridges,
Ports, Industrial parks, urban Infrastructure &
export sector.
 Ways of Raising ECBs?
6 |utomatic Route:
6 ECB for investment in real sector -industrial sector, especially
infrastructure sector-in India, are under |utomatic Route, i.e. do
not require RBI permission .
6 Government approval. In case of doubt as regards eligibility to
access

6 |pproval Route:
6 ECBs for investment which participated in the textile
and steel sector restructuring package requires approval
from RBI.
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6 Security to be provided to the overseas lender/
Supplier for securing ECBs is left to the borrower.
6 Creation of charge over the immovable assets and
financial securities, such as shares in favor of the
overseas lender are subject to regulation 8 of
notification no FEM| 20/RB 2000.
6 The choice of security for the ECB is left with the
borrower however the creation of charges over
immovable assets or financial securities in favor of an
overseas lender is subject to the regulation by the RBI.
6 The creation of security requires a DzNo Objectiondz
certificate from the Category I |D.
6 Under |utomatic Route:
6 Prohibition on the issuance of guarantees by Banks,
Financial Institutions and NBFCs.
6 Under |pproval Route:
6 Banks, FIǯs, and NBFCs may issue a guarantee , subject to
obtaining prior approval from the RBI.
6 ECBǯs entered into under either route can be serviced
without any prior approval and the amount of
principal, interest and other charges can be remitted
freely through an |D.

6 Existing ECBǯs can be refinanced by fresh ECBǯs

provided that the fresh ECB is at a lower all-in-cost and
the outstanding maturity, tenor and other terms of the
existing ECB are maintained.