PURPOSE

Corporations are allowed to obtain foreign currency denominated loans in India under the above plan for the following purposes:-

1. For meeting working capital requirements in Indian Rupees.
2. By way of pre-shipment advances/ post shipment advances to the exporters - dealt with separately.
3. Import of raw materials.
4. Import of capital goods.
5. Purchase of indigenous machinery.
6. Repayment of the existing Rupee Term Loan.
7. Repayment of existing ECB's.

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 require to bear themselves.

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 upto 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 the 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: 250,000
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 of 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 corporations 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 that has not yet expired or 3 years whichever is less.

Repayment of any existing ECBs

Repayment of ECB's is allowed after obtaining a certificate from the Company Secretary/Auditors that the borrower has

1. Availed of and utilised the ECB Loan in accordance with all relevant acts, Reserve Bank of India, Govt. rules, regulations and guidelines etc.
2. Submitted all the ECB 2 return to the concerned regional offices of Reserve Bank of India.

Documentation & Procedure

For FCNR(B) Loan by earmarking the working capital facilities, the borrowers can approach the concerned branch where they are enjoying credit facilities.

The branch will arrange for the sanction of the loan from the competent authority of the Bank.

For all other purposes, the foreign currency loans can be granted after proper assessment of the requirement of the borrower and the sanction of the same by the bank.

For sanction of these loans, the borrowers required to provide all the information required by the Bank for sanction of credit facilities.

After sanction of the facilities, execution of documents as per the procedure of the Bank and compliance of all the terms and conditions by the Bank, the loans are disbursed at one of the Position Maintaining Offices (Link) of the Bank.

Rate & Fee

The rates of interest and service charges depend on various parameters such as the financial strength of the corporate, maturity of the loan, security offered etc. and therefore the rates may vary from case to case basis.

Service Charges / Processing Charges:

These charges vary according to the purpose of the loan. The details are available from the nearest branch.

Commitment Fees:

1% p.a. if the loans are not availed of within -30- days from the date of sanction.

Pre-payment:

1% of the Loan amount for the remaining period of the Loan. No pre-payment charges in case the remaining period is less than 30 days.

Rate of Interest

• The rate of interest normally applicable to FCNR Loans for working capital requirements is over 3 months US$ LIBOR + 3% for A+ rated Clients.
  
  
• For the foreign currency denominated Term Loans, the maximum rate of interest is 4% over -6- months LIBOR.
  
  
• The rate of interest can also be arrived at after the merits into consideration.
  
  

For further details, please contact the Bank of Baroda Branch nearest to you.