RBI Stops Banks From Extending Ecbs For Repaying Rupee Loans
Banks, including their overseas branches or subsidiaries, should not extend such facilities on behalf of overseas joint ventures, wholly owned units and wholly owned step-down subsidiaries of Indian companies for raising loans and advances from other entities except in connection with the ordinary course of overseas business, the RBI said.
The RBI said that in certain cases, such facilities were used to avail of foreign currency loans for repayment of rupee loans.
The RBI also cautioned banks from issuing guarantees where exporter borrowers were using export advances for repayment of loans taken from banks.
"It has, however, come to our notice that some exporter borrowers are using export advances, received on the strength of guarantees issued by Indian banks, for repayment of loans availed of from Indian banks.
"This is a clear violation of our instructions except in cases where banks have received approvals under FEMA and banks are advised to desist from such practices," RBI said.
Banks are allowed to issue guarantees for debt, obligation or other liability incurred by an exporter on account of exports from India to facilitate only export contracts and not other purposes.
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