ECB Tracks: Which Applies to Your GCC
RBI's ECB framework has three tracks. Track I: medium-term foreign currency denominated ECBs with minimum 3-year average maturity (maximum maturity 10 years for most borrowers). Track II: long-term foreign currency denominated ECBs with minimum 10-year average maturity. Track III: Indian Rupee (INR) denominated ECBs with minimum 3-year average maturity.
For most GCCs where the parent lends in USD (or another foreign currency) to the Indian entity, Track I is the applicable track. Track III (INR ECB) is less common but relevant if the parent has accumulated INR balances in India (e.g., from dividend payments) and wants to relend them.
Eligible borrowers under ECB framework: all entities that have received FDI (including IT GCCs). Eligible lenders: foreign equity holders (including the parent company holding at least 25% equity), multilateral financial institutions, and overseas branches of Indian banks.
Permitted End-Use and Restrictions
Track I ECBs: can be used for capital expenditure (office fit-out, hardware, servers), operational expenditure for 3 years (this was relaxed for track I with minimum 5-year maturity), and for refinancing existing ECBs. Cannot be used for: equity investment in any form in India, on-lending to any entity, purchase of land, working capital beyond 3 years maturity ECB restrictions.
Track III (INR ECB): more permissive end-use includes working capital requirements. The broader end-use flexibility is why Track III is attractive for operating GCCs that need working capital funding from the parent.
Real estate restriction: ECB proceeds cannot be used for real estate activities or purchase of commercial property in India, which means a GCC cannot use ECB money to buy its office premises (though it can use it to fit out leased premises under capex rules).
Using ECB for equity investment requires specific RBI approval
A GCC that uses ECB proceeds to invest in another Indian entity's equity - even a wholly-owned subsidiary - without RBI approval is in violation of the end-use restrictions. This is a FEMA contravention. If you need to fund downstream investments, use equity capital (additional FDI) rather than ECB.
ECB-1 and ECB-2: Reporting Obligations
ECB-1 (Loan Registration Number application): when entering into an ECB, the Indian borrower must obtain an LRN (Loan Registration Number) from RBI by filing ECB-1 through the AD bank on the FIRMS portal before drawing down any funds. The ECB-1 captures the terms of the loan (amount, currency, maturity, interest rate, lender details).
ECB-2 (Monthly report): every month that an ECB is outstanding, the Indian borrower must file ECB-2 through the AD bank within 7 working days of the end of the month. The ECB-2 reports draw-downs, repayments, interest payments, and the outstanding balance. Even months with no activity must be reported (a 'nil' month report).
Glossary terms referenced in this guide