Ecb loans for working capital

Friends,

The company has got approval for external commercial borrowings from RBI on 1st May. The receipt of such loan was on 26th May. In mid, there was expenditure incurrred for project for which ECB was sanctioned (14th May).The same was satisfied from working capital. Now on receiving the funds from abroad, can we reimburse the amound spent for the project which the company has taken from the working capital.??

Pls help.

Sriram Venkatesan

Replies (3)

 

Hi Sriram,

As per RBI/2011-12/ 9 Master Circular No.9 /2011-12 :

https://rbidocs.rbi.org.in/rdocs/notification/PDFs/09MCEC300611.pdf

It has been clearly mentioned under ECB of part 1 ( End uses not permitted )

(c) For working capital, general corporate purpose and repayment of existing Rupee loans not permitted.

In your case we would consider the reimbursement of expenditure incurred on new project as "Repayment of existing rupee loans" - hence not permitted.

My view - But since the expenditure is on New project of the company and expended from the company - reimbursement of such amount would not be considered as a serious contravention and can be supported with reasonable explanation.

For further information you can go through the above master circular.

Due to lack of information I am unable to comment further.

Thank you.

Dear Sriram

ECB can be utilise for the purpose as mentioned in sanction letter provided by the bank.

And the company incurred some amount for taking ECB Disbursement / drawdown and other

type of expenses which incurred during the time when company started processsing of loan and upto

disbursement of loan are eligible for reimbursement.

Thanks

Yogesh Chaturvedi

 

Thank you for your valuable suggestion sir's.

Thanks,

Sriram.

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