What is an FCNR (B) account? Foreign Currency Non Resident (Banks) account is an investment avenue available to NRIs.

Accounts can be opened only in the form of term deposits and can be maintained in four currencies viz. Pound sterling, US Dollar, Japanese Yen and the Euro. Repayments, under this scheme, are made in . foreign currency and therefore it offers the depositor protection against .,,....,~xchange rate fluctuations. The tenor of the scheme ranges from 12 months to ~36 months. What is an FCNR (B) loan? FCNR (B) loans are a low cost, short-term funding source 'available to Indian corporates. Banks have been permitted to provide foreign currency denominated loans to their customers from the resources mobilised under the FCNR. (B) scheme. RBI granted this permission to help banks to deploy their FC1-ffi. funds in a more commercially viable manner and make available a better avenue of credit at cheaper interest rates to resident borrowers. Highlights .1-", . j No special permission is required from the regulatory authorities for availing FCNR (B) loans and the existing rupee credit limits can be converted into a foreign currency loan. The interest rates and the tenor of the loans are left free to be decided by negotiation __ between banks and borrowers. They are generally granted for periods upto three years. Normally, loans under Iliis sclleme arenoi 'given for an amount less. than USD 100,000.

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Ii Loans are gene<ra1.l.:x4lenominated jn the four currencies.in.which.Lv-e-. FCNR deposits are accepted viz. US Dollar, Euro, Japanese Yen and Pound Sterling, the US Dollar being the most popular currency of choice. In recent times, FCNR (B) loans have been the preferred route for many corporates especially with regard to their working capital requirements. Even though Commercial Paper (CP) can be used to raise low cost funding, it is not possible for all corporates to issue CPs due to the requirement of an acceptable credit rating for the purpose . Risks Involved While the introduction of the scheme has placed a low cost funding option at the disposal of Indian corporates, they have to deal with two types of risks when they avail such loans Foreign exchange risk - risk of rupee depreciation against the currency of loan as the principal and the interest have to be repaid in the foreign currency in which the loan is denominated. -- Interest rate risk - risk of the benchmark interest rate (LIBOR) being reset higher e.g. one year loan with interest rate fixing (reset) every three months). Therefore, the borrower has to take note of the fact that the loan is an advantage only when the overall cost of borrowing (cost of forward forex cover + interest cost) in foreign currency is less than the rupee cost of funds. '. _) Benefits over an ECB While the guidelines for raising an ECB have been relaxed considerably over the years, FCNR (B) loans are still the preferred route for most Indian corp orates for short term funding because of the ease and speed with which they can be raised.Moreimportantly, FCNR (B) loans are relatively free of the procedural hassles involved in raising ECBs (such as getting permission from RBI, periodic reporting etc). --------~ ~ - Procedural aspects The interest rate for the tenor of the loan is fixed on the date of draw

down and reset at the end..cl..the perioQ.iupasethcli2.anis ... rolled over under a longer term arrangement. If the borrower intendsto use the loan for rupee related expenditure, the proceeds of the loan should necessarily be converted into rupees as soon as the loan is disbursed. However, where the proceeds are to be used for remittances outside India (such as retirement of import bills), this condition does not apply . Costs involved The costing works out as follows Corporate A can avail rupee credit at 14% p.a. Alternatively, Corporate A can avail FCNR (B) loan. ()Example 1 The cost of a 6-month Dollar FCNR (B) Loan is as follows Date of Draw down 6 Month $ USOR (%) Bank's Margin (Spread over USOR assumed)% Cost of forward cover (annualised %)* Other transaction costs % Net rate (%) 16/05/00 6.98 2.00 2.50 0.52 12.00

* Indian foreign exchange regulations allow FNCR borrowers to buy foreign currency forward in FX markets. Forward contracts can be booked on the date \~~of draw down itself if it is desired to eliminate exchange rate risk completely . . Usually the four currencies in which the FCNR loans can be availed are at a premium to the rupee in the forward market. The borrower, therefore, has to pay a premium to buy the foreign currency forward. The premiums which are quoted in the market in paise can be expressed as an interest percentage . The comparative cost advantage is evident as it results in a net saving of 2%, on a fully hedged basis, over the rupee cost of funding. The cost can be reduced even further by not covering forwardjhe.full.Ioan.amount.on the date ofdraw down but by following a proactive hedging policy.

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Example 2

The cost ofa 6-montb yen ECNR (B) l,Pan is as.follows.c, _________________________________ ~=~== Date of Draw down 6 Month $ LlBOR (%) Bank's Margin (Spread over LlBOR I- assumed %) Cost of forward cover (annualised %) Other transaction costs % Net rate (%) The net saving in this case is 2.0% . Conclusion: <e\ ) Clearly, the rupee cost of funding should be used as the benchmark to evaluate the viability of this option . . In a stable rupee or low premium scenario, this avenue should be tapped more 18/05/00 0.14 1.50 9.50 0.86 12.00

1. Introduction 2. Guidelines 2.1 Definition of the term Deposit 2.2 Other important features of the scheme 2.3 Manner of payment of interest 2.4 Discretion to pay additional interest on deposits of banks staff 2.5 Premature withdrawal of deposits 2.6 Payment of interest on overdue FCNR(B) deposits 2.7 Advances against FCNR(B) deposits Manner of charging interest 2.8 Restrictions on advances against FCNR(B) deposits Quantum of loans 2.9 Margin on advance against term deposit 2.10 Interest payable on the deposit of a deceased depositor 2.11 Addition or deletion of name/s of joint account holders 2.12 Payment of interest on FCNR(B) deposits of NRIs on return to India 2.13 Conversion of FCNR(B) Accounts of the returning Indians into RFC Account Waiver of penalty 2 2.14 Conversion of FCNR(B) Accounts of the returning Indians into RFC Accounts/Resident Rupee Accounts Payment of interest 2.15 Payment of interest on term deposit maturing on Saturday/ Sunday/holiday/non-business working day 2.16 Prohibitions 3. Annex Master Circular on interest rates on deposits held in

FCNR (Banks) Accounts 1. INTRODUCTION 1.1 The Foreign Currency Non-Resident (FCNR(B)) scheme was introduced with effect from May 15, 1993 to replace the then prevailing FCNR(A) scheme introduced in 1975, where the foreign exchange risk was borne by RBI and subsequently by the Govt. of India. The FCNR(A) scheme was withdrawn in August, 1994 in view of its implications for the central banks balance sheet and quasifiscal costs to the Government. To begin with, the FCNR(B) scheme was applicable to deposits accepted in four currencies, viz., Pound Sterling, US Dollar, Deutsche Mark and Japanese Yen. On November 4, 2000 the FCNR(B) scheme was extended to cover deposits in EURO while deposits in Deutsche Mark were accepted only up to 31 December 2001. Maturity proceeds after this date on deposits in Deutsche Mark were payable only in EURO. With effect from January 1, 2002, the acceptable currencies for FCNR(B) deposits became Pound Sterling, US Dollar, Japanese Yen and Euro. On July 26, 2005 the scheme was extended to cover FCNR(B) deposits denominated in Canadian dollars and Australian dollars, in addition to the existing four currencies viz., US dollar, Pound Sterling, Euro and Japanese Yen. The minimum maturity period was raised from six months to 1 year, effective October,1999. From July 26, 2005 it was also decided to allow banks to accept FCNR(B) deposits up to a maximum maturity period of five years, against the earlier maximum limit of three years. 1.2 Earlier, the interest rates on FCNR(B) deposits were the same as those prescribed for FCNR(A) deposits. Effective April 16, 1997, banks were free to determine the interest rates (fixed or floating with an interest reset period of 6 months) subject to a prescribed ceiling. The present ceiling rate in respect of FCNR(B) deposits of all maturities is LIBOR/SWAP rate minus 75 basis points effective from the close of business in India on April 24,2007. 1.3 Earlier, up to January, 2006, LIBOR / SWAP rates as on the last working day of the previous month formed the base for fixing ceiling rates for interest on NRE / FCNR(B) deposits that would be offered effective from the following month. In order to ensure uniformity and transparency in interest rates on NRE / FCNR(B) deposit, it was decided that FEDAI would quote / display the LIBOR / SWAP 3 rates which will be used by banks in arriving at the interest rates on NRI deposits. FEDAI now publishes the deposit rates for five maturities in six currencies on the last working day of each month using a web page that can be accessed by all subscribers to the Reuters screen. The first such rates were indicated by FEDAI for the last working day of February, 2006. 1.4 A commercial bank which is an Authorised Dealer in foreign exchange should not pay interest on deposits of money accepted by it or renewed by it under the Foreign Currency (Non-Resident) Accounts (Banks) Scheme, which came into force from May 15, 1993, except in accordance with the rates as specified in Annex 1 hereto and on the terms and conditions specified in the guidelines given below. 2. GUIDELINES 2.1 Definition of the term Deposit The deposits under the Scheme mean term deposits received by the bank for a fixed period and withdrawable only after the expiry of the said fixed period and includes Reinvestment Deposits and Cash Certificates or other deposits of similar nature. 2.2 Other important features of the Scheme (i) The Scheme covers deposits in Pound Sterling, US Dollar, Canadian Dollar, Australian Dollar, EURO and Japanese Yen from non-resident individuals of Indian nationality or origin (NRIs). Note a) The facility of opening and maintaining FCNR(B) Accounts by Overseas Corporate Bodies such as overseas companies, firms, societies and other corporate bodies which are owned directly or indirectly to the extent of at least 60 per cent by NRIs and overseas trusts in which at least 60 per cent of the beneficial interest is irrevocably held by such persons (OCBs) has been withdrawn with effect from September 16, 2003. b) An existing FCNR(B) Account held in the name of an OCB may be continued till original maturity and on maturity the proceeds should be repatriated forthwith. (ii) Repatriation of funds in foreign currencies is permitted.

(iii) The deposits should be accepted under the Scheme for the following maturity periods: 4 (a) One year and above but less than two years (b) Two years and above but less than three years (c) Three years and above but less than four years (d) Four years and above but less than five years (e) Five years only Note Recurring Deposits should not be accepted under the FCNR(B) Scheme. (iv) Transfer of funds from existing NRE accounts to FCNR(B) accounts and vice versa, of the same account holder, is permissible without the prior approval of Reserve Bank of India. (v) A bank should obtain prior approval of its Board of Directors for the interest rates that it will offer on deposits of various maturities, within the ceiling prescribed by Reserve Bank of India. The Board of Directors of a bank may authorise the Asset Liability Management Committee to fix interest rates on deposits subject to reporting to the Board immediately thereafter. 2.3 Manner of payment of interest i) The interest on the deposits accepted under the scheme should be paid on the basis of 360 days to a year. ii) The interest on FCNR(B) deposits should be calculated and paid in the manner indicated below: a) For deposits up to one year, at the applicable rate without any compounding effect, b) In respect of deposits for more than 1 year, at intervals of 180 days each and thereafter for the remaining actual number of days. However, the depositor will have the option to receive the interest on maturity with compounding effect. 2.4 Discretion to pay additional interest not exceeding one per cent on deposits of bank's staff In respect of a deposit accepted in the name of i) a member or a retired member of the bank's staff, either singly or jointly with any other member or members of his/her family, or ii) the spouse of a deceased member or a deceased retired member of the bank's staff, a bank may, at its discretion, allow additional interest at a rate not exceeding one per cent per annum over and above the rate of interest prescribed by the bank subject to the following conditions: a) The depositor or all depositors of a joint account is/are non-resident/s of Indian nationality or origin, and; b) The bank should obtain a declaration from the depositor concerned that the moneys so deposited or which may, from time to time, be deposited, shall be moneys belonging to the depositor, as stated in clauses (i) or (ii) above. 5 iii) The rate fixed by the bank for deposits of staff members, existing or retired, should not exceed the ceiling rate prescribed by RBI (please refer to para (a) of Annex 1). Explanation 'Family' means and includes the spouse of the member/retired member of the bank's staff, his/her children, parents, brothers and sisters who are dependent on such a member/retired member but does not include a legally separated spouse. 2.5 Premature withdrawal of deposits (i) Banks on request from the depositor should permit premature withdrawal of deposits under the FCNR(Banks) Scheme. Banks are free to levy penalty for such premature withdrawal at their discretion. Banks may also, at their discretion, levy penalty to recover the swap cost in the case of premature withdrawal of FCNR(B) deposits. Where premature withdrawal of FCNR(B) deposits take place before completion of the minimum stipulated period of one year, in which case no interest is payable, banks may at their discretion levy penalty to cover the swap cost. However, the components of penalty should be clearly brought to the notice of the depositors at the time of acceptance of the deposits. If the depositors are not informed of the penalty provisions at the time of acceptance of deposits, the exchange loss arising out of premature withdrawal will have to be borne by the banks. (ii) Conversion of FCNR(B) deposits into NRE deposits or vice-versa before maturity should be

subject to the penal provision relating to premature withdrawal. 2.6 Payment of interest on overdue FCNR(B) Deposits Banks may, at their discretion, renew an overdue deposit or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days. The rate of interest payable on the amount of the deposit so renewed should be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower. In the case of overdue deposits where the overdue period exceeds 14 days and if the depositor places the entire amount of overdue deposit or a portion thereof as a fresh FCNR(B) deposit, banks may fix their own interest rates for the overdue period on the amount so placed as a fresh term deposit. Banks will have the freedom to recover the interest so paid for the overdue period if the deposit is withdrawn before completion of the minimum stipulated period under the scheme, after renewal. 2.7 Advances against FCNR(B) deposits Manner of charging interest (i) When a loan or an advance is granted against a FCNR(B) term deposit which stands in the name of: a) the borrower either singly or jointly; b) one of the partners of a partnership firm and the advance is made to the said firm; 6 c) the proprietor of a proprietary concern and the advance is made to such a concern; d) a ward whose guardian is competent to borrow on behalf of the ward, and where the advance is made to the guardian of the ward in such capacity; a bank would be free to charge a rate of interest without reference to its own Benchmark Prime Lending Rate (BPLR). A bank, at its discretion, may charge a rate of interest less than what was prescribed above in the case of advances up to Rs.3 lakh, when converted notionally in Rupees at the time of granting advance, to a member or a retired member of the bank's staff or the spouse of a deceased member/retired member of the bank's staff against his/her term deposit specified in paragraph 2.4 above. (ii) When an advance is granted against a term deposit which is not in the nature of sub-clause (i) above; a) a bank would be free to charge a rate of interest without reference to the Benchmark Prime Lending Rate, provided the advance is up to Rs. 2 lakh, and b) if the advance exceeds Rs.2 lakh, the bank should charge interest at the rate prescribed in terms of Reserve Bank of India's directive relating to interest rates on advances issued from time to time. If the term deposit against which an advance was granted is withdrawn before completion of the prescribed minimum maturity period, such an advance should not be treated as advance against term deposit and interest should be charged as prescribed in terms of Reserve Bank of India's directive on interest rates on advances issued from time to time. (iii) When a loan or advance is granted out of resources mobilised under the scheme, interest rate chargeable should be at the rate as prescribed in terms of Reserve Bank of Indias directive relating to Interest Rates on Advances. 2.8 . Restrictions on advances against FCNR(B) Deposits Quantum of loans The Third Quarter Review of Annual Statement on Monetary Policy for the Year 2006-07 (para 86), has observed that keeping in view the objective of making these facilities available to individual NonResident Indians (NRIs) and considering the prevailing monetary conditions, there is merit in avoiding upward pressure on asset prices in sensitive sectors through utilisation of this facility. Therefore, banks are prohibited from granting fresh loans or renewing existing loans in excess of Rupees twenty (20) lakh against NR(E)RA and FCNR(B) deposits either to the depositors or third parties. Accordingly, banks should not grant fresh loans or renew existing loans in excess of Rupees twenty (20) lakh against FCNR(B) deposits, either to depositors or to third parties, with effect from January 31, 2007. Banks should not undertake artificial slicing of the loan amount to circumvent the ceiling. 7

2.9 Margin on advance against term deposit Banks may determine the margin on a case-to-case basis. 2.10 Interest payable on the deposit of a deceased depositor In the case of a term deposit standing in the name/s of i) a deceased individual depositor, or ii) two or more joint depositors, where one of the depositors has died, interest should be paid in the manner indicated below : a) at the contracted rate on the maturity of the deposit; b) in the event of the payment of the deposit being claimed before the maturity date, the bank should pay interest at an applicable rate prevailing on the date of placement of the deposit, without charging penalty; c) in the event of death of the depositor before the date of maturity of the deposit and the amount of the deposit being claimed after the date of maturity, the bank should pay interest at the contracted rate till the date of maturity. From the date of maturity to the date of payment, the bank should pay simple interest at the applicable rate operative on the date of maturity, for the period for which the deposit remained with the bank beyond the date of maturity. However, in the case of death of the depositor after the date of maturity of the deposit, the bank should pay interest at a rate operative on the date of maturity in respect of savings deposits held under RFC Account Scheme, from the date of maturity till the date of payment; d) if, on request from the claimant/s, the bank agrees to split the amount of term deposit and issues two or more receipts individually in the name/s of the claimant/s, it should not be construed as premature withdrawal of the term deposit for the purpose of levy of penalty provided the period and aggregate amount of the deposit do not undergo any change. Note: In the case of claimant/s being residents, the maturity proceeds may be converted into Indian rupees on the date of maturity and interest be paid for the subsequent period at the rate applicable to a deposit of similar maturity under the domestic deposit scheme. 2.11. Addition or deletion of name/s of joint account holders A bank may, at the request of all the joint holders, allow the addition or deletion of name/s of joint account holder/s if the circumstances so warrant or allow an individual depositor to add the name of another person as a joint holder. However, in no case should the amount or duration of the original deposit undergo a change in any manner whatsoever, and all the joint account holders should be nonresidents of Indian nationality or origin. The bank should ascertain the reasons from the applicants for doing so and also satisfy themselves about the bona fide nature of the request. Further, opening of accounts in the names of Pakistani/Bangladeshi nationals, though of Indian origin, will require approval of the Reserve Bank from the exchange control angle. 8 2.12 Payment of interest on FCNR(B) deposits of NRIs on return to India Banks may allow FCNR(B) deposits of persons of Indian nationality/origin who return to India for permanent settlement to continue till maturity at the contracted rate of interest, if desired. Except the provision relating to rate of interest and reserve requirements as applicable to FCNR(B) deposits, for all other purposes, such deposits should be treated as resident deposits from the date of return of the account holder to India. Premature withdrawal of such FCNR(B) deposits should be subject to penal provisions of the Scheme. Banks should convert the FCNR(B) deposits on maturity into Resident Rupee Deposit Account or RFC Account (if eligible) at the option of the account holder. The rate of interest on the new deposit (Rupee account or RFC Account) should be the relevant rate applicable for such deposit account. 2.13. Conversion of FCNR(B) Accounts of Returning Indians into RFC Account - Waiver of Penalty The penal provisions would not be applicable in the case of premature conversion of balances held in FCNR(B) deposits into Resident Foreign Currency Accounts by Non-Resident Indians on their return to India. 2.14 Conversion of FCNR(B) Accounts of Returning Indians into RFC Accounts/Resident Rupee Accounts- Payment of interest

A bank should pay interest at its discretion at the time of conversion of FCNR(B) Account into RFC/Resident Rupee Account even if the same has not run for a minimum maturity period, subject to the condition that the rate of interest should not exceed the rate payable on savings bank deposits held under RFC Account Scheme. 2.15 Payment of interest on term deposit maturing on Saturday/Sunday/ holiday/non-business working day In respect of a term deposit maturing for payment on a Saturday/Sunday or a holiday or a nonbusiness working day, banks should pay interest at the originally contracted rate on the deposit amount for the Saturday/ Sunday/ holiday/non-business working day intervening between the date of expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day. 2.16 Prohibitions No bank should: i) accept or renew a deposit over five years; ii) discriminate in the matter of rate of interest paid on the deposits, between one deposit and another accepted on the same date and for the same maturity, whether such deposits are accepted at 9 the same office or at different offices of the bank, except on the size group basis. The permission to offer varying rates of interest based on size of the deposits will be subject to the following conditions: a) Banks should, at their discretion, decide the currency-wise minimum quantum on which differential rates of interest may be offered. For term deposits below the prescribed quantum with the same maturity, the same rate should apply. b) The differential rates of interest so offered should be subject to the overall ceiling prescribed. c) Interest rates paid by the bank should be as per the schedule and not subject to negotiation between the depositor and the bank. iii) pay brokerage, commission or incentives on deposits mobilized under FCNR(B) Scheme in any form to any individual, firm, company, association, institution or any other person. iv) employ/ engage any individual, firm, company, association, institution or any other person for collection of deposit or for selling any other deposit linked products on payment of remuneration or fees or commission in any form or manner. 10 Annex 1 Interest rates applicable to deposits accepted under Foreign Currency Non-Resident Accounts (Banks) Scheme (a) In respect of FCNR(B) deposits of all maturities contracted effective close of business in India on April 24, 2007, interest shall be paid within the ceiling rate of LIBOR/SWAP rates minus 75 basis point for the respective currency / corresponding maturities. On floating rate deposits, interest shall be paid within the ceiling of SWAP rates minus 75 basis point for the respective currency/maturity. For floating rate deposits, the interest reset period shall be six months. (b) The LIBOR/SWAP rates as on the last working day of the preceding month would form the base for fixing ceiling rates for the interest rates that would be offered effective the following month. (c) FEDAI would quote / display the LIBOR / SWAP rates which should be used by banks in arriving at the rates of interest to be offered on FCNR(B) deposits. FEDAI would also publish the deposit rates for five maturities in six currencies on the last working day of each month using a web page that can be accessed by all subscribers (banks) to the Reuters Screen. Accordingly, beginning February 28, 2006, FEDAI displays the LIBOR/SWAP rates on an exclusive page "INFEDAIFCNRNRE" on Reuters Monitor Screen. The rates are also displayed on the FEDAI website www.fedai.org.in.

Foreign Currency Loans in India to holders of FCNR(B) Deposits

Attention of authorised dealers is invited to sub-regulation 1(v) of regulation 4 of Reserve Bank Notification No.FEMA.3/2000-RB dated May 3, 2000 in terms of which a branch outside India of an authorised dealer is empowered to 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. 2. With a view to extend the above facility in India to the account holders, it has now been decided to permit authorised dealers to grant foreign currency loans in India against the security of funds held in FCNR (B) deposit accounts to the account holders only, subject to the guidelines given in the Annexure. Further, authorised dealers should also comply with the instructions for grant of loans against non-resident deposits contained in the Circular DBS.FGV (F) No.BC.13/23.04.001/2001-02 dated May 21, 2002 issued by the Department of Banking Supervision, Reserve Bank of India, prescribing inter alia, precautions to be taken by banks while granting loans against nonresident deposits. 3. The Notification to amend the regulations referred to above is being issued separately. 4. Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned. 5. The directions contained in the circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).

Guidelines for grant of foreign currency loans in India to holders of FCNR (B) Deposits (a) Loans should be against own FCNR (B) deposits and not against the deposits of third parties. (b) Loans should be granted only to the deposit holder and not to any third party/ ies. The documents should be executed by the deposit holders themselves and not by their Power of Attorney holders. (c) The maturity of the loan shall not exceed the maturity of the deposit under any circumstances. (d) Loans shall be sanctioned to the account holders for purposes other than investments in India. (e) Advances shall be fully secured by the deposit and regulations, if any, relating to margin shall be complied with. (f) Repayment is to be effected by fresh remittances in foreign exchange or by adjustment of the deposit. (g) The bank should put in place adequate monitoring system for the purpose. (h) Extension of this facility should have the approval of the Board of the bank. ********* FCNR (B) Loans Corporates can loans from the Banks who are authorised dealers. Bank of Baroda grants FCNR (B) Loans through its Position Maintaining Offices at Mumbai, New Delhi, Kolkata, Chennai and Ahmedabad. The Indian corporates/ firms are allowed to raise the funds through foreign currency loans at the selected Indian branches within the prevailing policy guidelines of the Bank/ RBI. Key Benefits FCNR (B) loans are beneficial to the corporates on account of following:

At times, it may entail lesser interest cost vis--vis Rupee borrowings. The borrower is not required to go to the International market for raising the funds as foreign currency funds are made available in India reducing the cost of raising such funds.

Broad purpose of loans Corporates are allowed to obtain foreign currency denominated loans in India under the above scheme for the following purposes: 1. 2. 3. 4. 5. 6. 7. For meeting working capital requirements in Indian Rupees. By way of pre-shipment advances/ post shipment advances to the exporters. Import of raw materials. Import of capital goods. Purchase of indigenous machinery. Repayment of the existing Rupee Term Loan. Repayment of any existing ECB's with the permission from RBI, Govt. of India.

The present guidelines for the different purposes of the loans are as under:

For meeting working capital requirements in Indian Rupees.

The loan can be granted after proper assessment and sanction of working capital requirements/ Maximum Permissible Bank Finance (MPBF). The borrowers should have natural hedge to cover themselves from exchange risk, which they will have to bear. The borrowers who do not have natural hedge are required to take forward cover to avoid the exchange risk. The borrowers with a sound financial strength, higher ratings say A+/A and do not have natural hedge may also be considered. The loan can be disbursed up to 90% of the MPBF limit. Wherever borrowers are covered under the Loan system for delivery of Bank credit, bifurcation of MPBF limit into foreign currency loan, loan component in rupees, cash credit component and bill limit should conform to RBI guidelines. The foreign currency loan amount is to be taken as a part of loan component provided minimum period of the loan is -6- months. Foreign currency loan can be disbursed in -4- currencies viz US$, Sterling, Euro and Japanese Yen. Minimum amount of the loan US$, GBP, Euro: 100,000 Japanese Yen: 10 million. Loan to exporters by way of Pre Shipment Credit in Foreign Currency (PCFC)/ Post Shipment Credit in Foreign Currency (PSFC) The exporters can avail this facility by way of pre-shipment credit as well as post shipment credit in foreign currency. All other terms applicable to such type of Rupee advances shall also be applicable to foreign currency advances. Import of raw materials. The importers can take benefit of foreign currency loans for import of raw materials in lieu of rupee MPBF sanctioned to them. The rupee equivalent of the foreign currency loan amount is to be earmarked in the overall sanctioned MPBF limit. This loan can also be repaid in foreign currency.

Import of capital goods. The importers of capital goods can avail the foreign currency loan for a period not exceeding -3- years including moratorium period. Normally, the import of capital goods should be arranged on 180 days Usance basis. Purchase of indigenous machinery. The corporates can raise the foreign currency loans for their capital expenditure/ project expansion plans etc for the purchase of indigenous machinery. Repayment of existing Rupee Term Loan The Foreign Currency Loans can be utilised for the repayment of the existing Rupee Term Loan provided the duration of the foreign currency loan does not exceed the portion of the existing rupee loan which has not yet expired or 3 years whichever is less. Repayment of ECB's The repayment of the ECB's requires permission from the Government of India / RBI as per the applicable guidelines. Corporates can raise the FCNR (B) Loans after obtaining requisite permission from RBI/ Govt. of India and completing other formalities