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Foreign Currency Non-Resident (FCNR-B) Loans
Most Important Terms and Conditions (MITC)
Documentation & Procedure
Foreign Currency Non-Resident (FCNR-B) Loans : Overview
Corporates can avail loans from Bank of Baroda. The Indian corporates/firms are allowed to raise the funds through foreign currency loans at select Indian branches within the prevailing policy guidelines of the bank/RBI.
Foreign Currency Non-Resident (FCNR-B) Loans : Benefits
FCNR (B) loans are beneficial to the corporates on account of following:
- At times, it may entail lesser interest cost 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.
Foreign Currency Non-Resident (FCNR-B) Loans : Features
Broad purpose of loans
Corporates are allowed to obtain foreign currency denominated loans in India under the above scheme for the following purposes:
- 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 External Commercial Borrowings (ECBs) 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 of 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
USD, 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 External Commercial Borrowings (ECBs)
The repayment of the ECBs 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/Government of India and completing other formalities.
Foreign Currency Non-Resident (FCNR-B) Loans : Most Important Terms and Conditions (MITC)
- Service/processing charges vary according to the purpose of the loan.
- 1% p.a. if the loans are not availed of within 30 days from the date of sanction.
- 1% of the Loan amount for the remaining period of the loan will be deducted on prepayment.
- The rate of interest normally applicable to FCNR Loans is governed by the circulars issued by international division at corporate centre from time to time. At present the indicative rates depends on the credit rating of the party i.e. for "AAA" rated customers it is 500 bps over 3 months USD LIBOR, FOR "AA' rated customers it is 550 bps over three months LIBOR and for "A" rated customers it is 600 bps over USD LIBOR.
- For the foreign currency denominated term loans, the maximum rate of interest is 4% over 6 months LIBOR.
Foreign Currency Non-Resident (FCNR-B) Loans : Documentation & Procedure
- To avail of 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 are 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.
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