With the sole motive of promoting external finance and foreign trade, Foreign Exchange Management Act, 1999 and Foreign Exchange Regulations, 2000 were enforced to control the negative impact of the liberalization. It prolonged up to outlining the confines of the foreign exchange and clarifying the miscellaneous role of the apex bank of India in it. It also materialized the conception of lending by non-resident Indians or Foreigners to Indian citizens. The global financial markets are a very beneficial source of debt finance, particularly for businesses in India, owing to the Low-interest rates @ 2.75% (per annum) fix for the complete tenure prevailing globally when compared to the Indian financial markets.
Financial markets outside are considered to be as the most lucrative alternative of borrowing/financing attributable to the cheaper interest rates as equated to the Indian financial markets. Reserve Bank of India (“RBI”) has been a bit conventional with the assistance of the tools of law that is Foreign Exchange Management Act, 2000(“FEMA”) and Foreign Exchange Regulations, 2000. Recently, in regards to the aspect of overseas borrowing, be it commercial or private, rules of the RBI are long debated. The laws have made external borrowings to be wholly legal and are soft loan facilitators but there have been so much of compliances and requirements so as to materialize those transactions. These can be taken under the professional supervision of soft loan facilitator in India like us.
Brief guidelines given by FEMA in regards to business loans in India, particularly the availability of soft loans for businesses for Indian corporates, accompanied by restrictions as approved by RBI have been laid down below:
If you are looking big business loan in India, then have a look at what Soft Loans entail.
Definition: Foreign Soft Loan for businesses or overseas borrowings refer to commercial loans given in the form of bank loans, buyers’ credit, suppliers’ credit, and shareholder’s loans. These are availed by any Indian borrower from non-resident moneylenders. These must have at least an average maturity of 3 years.
|Particulars||Automatic Route||Approval Route|
|How is borrowing availed?||Under the Automatic Route, the Indian corporation can apply with its native Indian bank for an authorization to avail foreign soft loan India if some parameters (interest rate / maturity) are met. If the parameters are met, the obligatory loan registration number will be given within a particular timeframe.||Under the Approval Route, the Indian corporation has to seek the permission of the RBI to avail business loans in India foreign lending particularly if certain parameters are proposed to be surpassed. The RBI will gauge the application exhaustively and it typically takes some months before a verdict is given.|
|Who can take these loans?||Any company listed under the Companies Act, 1956, other than a financial intermediate such as a Bank, financial institution, housing finance firm and a non-banking finance corporation) is qualified for borrowings in foreign exchange under this Schedule
|Who can lend?||
|Constraint on End Use||The foreign borrowing in India shall not be utilized for any other purpose including the following commitments, viz. On-lending, investment in capital (stock) market, investment in real estate trade, working capital requirements, general corporate purpose sand reimbursement of rupee loans.||The foreign direct investment in form of soft loan shall not be used for any other purpose including the following purposes, viz. On-lending, investment in capital (stock) market, investment in real estate business, working capital needs, general corporate purpose and reimbursement of Rupee loans.|
|Recent Amendment||On 4 September 2013, the Reserve Bank of India (RBI) issued a circular which permits Indian companies to borrow moneys from foreign shareholders also for funding general corporate purposes. This is a chief relaxation of law. Some conditions still have to be satisfied and the loan must be applied for by the Indian company with the RBI under the so called Approval Route (Circular No. 31 A.P. (DIR Series), dated September 4, 2013). The circular has immediate effect.|