Ecb

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G S Pradeep (Querist)
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10 December 2011 Dear Sir,

One of my client is Subsidiary of a foreign company. Foreign company invested 99% in the share capital of the company. Because of some reasons they have not started their Business in India. Now they have share capital amount in the Books. They don't want to use Share capital amount for daily expenses. They have one Idea. They want to pay salary, rent etc monthly expenditures directly to the account of Employee and landlord from Foreign company account (i.e., Holding company Bank account.) Is it permissible.

Thanks in advance.

Regards Pradeep GS

Vishal D Shah

Vishal D Shah (Expert)
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11 December 2011 As per your heading let me clarify, ecb cannot be utilized for working capital. Hence that option is ruled out.

G S Pradeep

G S Pradeep (Querist)
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11 December 2011 Thank You.

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rvsekar2000

rvsekar2000 (Expert)
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23 December 2011 Hello,

Please note that foreign funds into India is to be routed through two heads:

1.FDI

2. ECB

The foreign company cannot pay directly to Indian service providers and employees. Then , there will be question of how this expenses will be reimbursed to foreign remitter later.

As said , there is end use restrictions for ECB. ECB cannot be used for repayment of term loan or working capital purposes.

ECB is not allowed to for repayment of Working Capital.

Please read the following for more details:

http://rvseckarfema.blogspot.com/2010/09/can-ecb-raised-for-repayment-of-term.html

If your company is dealing in Infrastructure sector , it can avail ECB to repay upto 25% of the rupee loan availed from their bankers to repay their term loan availed for capital expenditure.

http://rvseckarfema.blogspot.com/2011/09/now-infrastructure-company-can-repay.html

Regards

R.V.Seckar
Mobile- 09848915177

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