RBI issues ECB guidelines for start-ups

| Updated on: Jan 16, 2018

Start-ups can borrow up to $3 million or equivalent per financial year — either in rupees, or any convertible foreign currency or a combination of both — for a minimum average maturity period of three years, the RBI said in its guidelines for start-ups to access loans under the external commercial borrowing (ECB) framework.

Spelling out the eligibility criteria for start-ups to tap ECBs, the RBI, in a circular to banks authorised to deal in foreign exchange, said an entity should be recognised as a start-up by the Central government as on the date of raising ECB.

RBI said the lender/investor in the ECB should be a resident of a country which is either a member of the Financial Action Task Force or a member of a FATF-Style Regional Body, and should not be from a country identified in the public statement of the FATF. Overseas branches/subsidiaries of Indian banks and overseas wholly owned subsidiary/joint venture of an Indian company will, however, not be considered as recognised lenders under this framework. According to the RBI, the borrowing can be in the form of loans, non-convertible, optionally convertible or partially convertible preference shares. Conversion into equity is freely permitted, subject to regulations applicable for foreign investment in start-ups.

Published on October 27, 2016
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