FOREIGN EXCHANGE MANAGEMENT (BORROWING OR LENDING IN FOREIGN EXCHANGE) REGULATIONS, 2000*

FEMA 3/2000-RB, dated 3-5-2000 [GSR 386(E), dated 3-5-2000] - In exercise of the powers conferred by clause (d) of sub-section (3) of section 6, sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the following regulations for borrowing or lending in foreign exchange by a person resident in India, namely :-

Short title and commencement.

1. (i) These Regulations may be called the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000.

(ii) They shall come into force on 1st day of June, 2000.

Definitions.

2. In these regulations, unless the context otherwise requires-

(a) 'Act' means the Foreign Exchange Management Act, 1999 (42 of 1999);

(b) 'authorised dealer' means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Act;

(c) EEFC account', 'RFC account' mean the accounts referred to in the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000;

(d) 'FCNR(B) account', 'NRE account' mean the accounts referred to in the Foreign Exchange Management (Deposit) Regulations, 2000;

(e) 'Indian entity' means a company or a body corporate or a firm in India;

(f) 'Joint Venture abroad' means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity;

(g) 'Schedule' means the Schedule to these Regulations;

(h) 'Wholly owned subsidiary abroad' means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and whose entire capital is owned by an Indian entity;

(i) the words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act.

Prohibition to Borrow or Lend in Foreign Exchange.

3. Save as otherwise provided in the Act, Rules or Regulations made there under, no person resident in India shall borrow or lend in foreign exchange from or to a person resident in or outside India:

Provided that the Reserve Bank may, for sufficient reasons, permit a person to borrow or lend in foreign exchange from or to a person resident outside India.

Borrowing and Lending in Foreign Exchange by an Authorised dealer.

4. (1) An authorised dealer in India or his branch outside India may lend in foreign currency in the circumstances and subject to the conditions mentioned below, namely:

(i) A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may extend foreign currency loans in the normal course of its banking business outside India;

(ii) An authorised dealer may grant loans to his constituents in India for meeting their foreign exchange requirements or for their rupee working capital requirements or capital expenditure subject to compliance with prudential norms, interest rate directives and guidelines, if any, issued by Reserve Bank in this regard;

(iii) An authorised dealer may extend credit facilities to a wholly owned subsidiary abroad or a joint venture abroad of an Indian entity:

Provided that not less than 51 per cent of equity in such subsidiary or joint venture is held by the Indian entity subject to compliance with the Foreign Exchange Management (Transfer or Issue of Foreign Security) Regulations, 2000;

(iv) An authorised dealer may, in his commercial judgment and in compliance with the prudential norms, grant loans in foreign exchange to his constituent maintaining 1[***] RFC Account, against the security of funds held in such account;

(v) A branch outside India of an authorised dealer may extend foreign currency loans against the security of funds held in NRE/FCNR deposit accounts maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2000;

(vi) Subject to the directions or guidelines issued by the Reserve Bank from time to time, an authorised dealer in India may extend foreign currency loans to another authorised dealer in India;

2[(vii) An authorised dealer may grant foreign currency loans in India against the security of funds held in FCNR(B) account to the account holder only, subject to the guidelines issued by the Reserve Bank in this regard.]

(2) An authorised dealer in India may borrow in foreign currency in the circumstances and subject to the conditions mentioned below, namely :

(i) An authorised dealer may borrow from his Head Office or branch or correspondent outside India1[or any other entity as permitted by Reserve Bank] up to 2[hundred per cent or such other limit as decided by the Reserve Bank, from time to time] of his unimpaired Tier I capital or US $ 10 million, whichever is more, subject to such conditions as the Reserve Bank may direct. Explanation.-For the purpose of clause (i), the aggregate loans availed of by all branches in India of the authorised dealer from his Head Office, all branches and correspondents outside India, shall be reckoned.

3[***]

4[(ii)] A branch outside India of an authorised dealer being a bank incorporated or constituted in India, may borrow in foreign currency in the normal course of its banking business outside India, subject to the directions or guidelines issued by the Reserve Bank from time to time, and the Regulatory Authority of the country where the branch is located.

4[iii] An authorised dealer may borrow in foreign currency from a bank or a financial institution outside India, for the purpose of granting pre-shipment or post-shipment credit in foreign currency to his exporter constituent, subject to compliance with the guidelines issued by the Reserve Bank in this regard.

Borrowing and Lending in Foreign Exchange by persons other than authorised dealer.

5. (1) An Indian entity may lendin foreign exchange to its wholly owned subsidiary or joint venture abroad constituted in accordance with the provisions of Foreign Exchange Management (Transfer or Issue of Foreign Security) Regulations, 2000.

(2) A person resident in India may borrow, whether by way of loan or overdraft or any other credit facility, from a bank situated outside India, for execution outside India of a turnkey project or civil construction contract or in connection with exports on deferred payment terms, provided the terms and conditions stipulated by the authority which has granted the approval to the project or contract or export in accordance with the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000.

(3) An importer in India may, for import of goods into India, avail of foreign currency credit for a period not exceeding six months extended by the overseas supplies of goods, provided the import is in compliance with the Export Import Policy of the Government of India in force.

(4) A person resident in India may lend in foreign currency out of funds held in his EEFC account, for trade related purposes to his overseas importer customer :

1[Provided that where the amount of loan exceeds US $ 100,000, a guarantee of a bank of international repute situated outside India is provided by the overseas borrower in favour of the lender.]

(5) Foreign currency loans may be extended by Export Import Bank of India, Industrial Development Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment Corporation of India Limited, Small Industries Development Bank of India Limited or any other institution in India to their constituents in India out of foreign currency borrowings raised by them with the approval of the Central Government for the purpose of onward lending.

2[(6) An individual resident in India may borrow a sum not exceeding US$ 250,000 or its equivalent from his close relatives outside India, subject to the conditions that-

a. the minimum maturity period of the loan is one year;

b. the loan is free of interest; and

c. the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender.

Explanation : 'Close relative' means relative as defined in section 6 of the Companies Act, 1956.]

3[(7) Indian companies in India may grant loans in foreign currency to the employees of their branches outside India for personal purposes provided that the loan shall be granted for personal purposes in accordance with the lender's Staff Welfare Scheme/Loan Rules and other terms and conditions as applicable to its staff resident in India and abroad.]

4[Other borrowings in foreign exchange under Automatic Route or with prior approval of Reserve Bank of India under the Approval Route or as Trade Credit.

6. (1) A person resident in India, other than a branch or office in India owned or controlled by a person resident outside India, may raise in accordance with the provisions of the Automatic Route Scheme specified in Schedule I, foreign currency loans of the nature and for the purposes as specified in that Schedule; provided that this shall be deemed to have come into force with effect from February 1, 2004 except in relation to item l(iv)(A)(c) of Schedule I which shall be deemed to have come into force with effect from February 23, 2004.

(2) A person resident in India who desires to raise foreign currency loans of the nature or for the purposes as specified in Schedule II and who satisfies the eligibility and other conditions specified in that Schedule, may apply to the Reserve Bank for prior approval to raise such loans; provided that this shall be deemed to have come into force with effect from February 1, 2004 except in relation to item 3(iii)(A)(c) of Schedule II which shall be deemed to have come into force with effect from February 23, 2004.

(3) Trade Credit not exceeding USD 20 million per import transaction shall be raised by borrowings subject to the terms specified in Schedule III hereto; provided that this shall be deemed to have come into force with effect from April 17, 2004.]

1[(4)] 2[Where prior approval is required] the Reserve Bank may grant its approval subject to such terms and conditions as it may consider necessary :

Provided that while considering the grant of approval, the Reserve Bank shall take into account the overall limit stipulated by it, in consultation with the Central Government, for availment of such loans by the persons resident in India.

3[(5)] 4[The Reserve Bank may grant its approval to any other foreign currency loan proposed to be raised by a person resident in India, which falls outside the scope of Schedules I, II and III, subject to such terms and conditions as it may consider necessary.]

5SCHEDULE I

[See Regulation 6(1)]

Borrowings in Foreign Exchange under the Automatic Route

1. Borrowing in Foreign Exchange up to US$ 500 million or its equivalent

The borrowing in foreign exchange by a person resident in India under the Automatic Route is subject to the terms and conditions set out in this Schedule:

6[(i) Eligibility

(a) Any company registered under the Companies Act, 1956, other than a financial intermediary (such as a Bank, financial institution, housing finance company and a non-banking finance company) is eligible to borrow under this Schedule :

7[Provided that in case the entity is under investigation/adjudications/appeals by the law enforcing agencies, for violation of any of the provision of the regulations under the Act, it shall indicate to the Authorized Dealers (ADs) about pendency of investigations/ adjudications/appeals, while availing foreign currency borrowing.]

1[(b) Non-Government Organisations and Micro Finance Institutions engaged in micro-finance activities may borrow in foreign exchange under this Schedule under such terms and conditions as specified by the Reserve Bank from time to time :

2[Provided that in case the entity is under investigation/adjudications/appeals by the law enforcing agencies, for violation of any of the provision of the regulations under the Act, it shall indicate to the Authorized Dealers (ADs) about pendency of investigations/ adjudications/appeals, while availing foreign currency borrowing.]]

(c) Any other entity as specified by the Reserve Bank :

3[Provided that in case the entity is under investigation/adjudications/appeals by the law enforcing agencies, for violation of any of the provision of the regulations under the Act, it shall indicate to the Authorized Dealers (ADs) about pendency of investigations/ adjudications/appeals, while availing foreign currency borrowing.]

(ii) Amount

(a) The borrowing in foreign exchange by an entity as specified in paragraph (i)(a) of section 1 of Schedule I, under the Automatic Route whether raised in tranches or otherwise, shall not exceed USD 500 million or equivalent in any one financial year (April-March).

4[(b) The borrowings in foreign currency under as specified in paragraph (i)(b) of section I of Schedule I, by a non-Government organisation and Micro Finance Institution engaged in micro-finance activities shall not exceed USD 10 million or equivalent during a financial year (April-March).]

(iii) Lenders - The borrowings in foreign currency by way of issue of bonds, floating rate notes or other debt instruments by whatever name called may be made from-

(a) International bank or export credit agency or international capital market, or

(b) Multilateral financial institutions, namely, IFC, ADB, CDC etc., or

(c) Foreign collaborator or foreign equity holder as specified by the Reserve Bank, or

(d) Supplier of equipments provided the amount of loan raised does not exceed the total cost of the equipment being supplied by the lender, or

(e) Any other eligible entity as prescribed by the Reserve Bank in consultation with Government of India.

(iv) Purpose (End-use)

(A) Borrowing in foreign exchange in terms of this Schedule may be for any of the following purposes, namely:-

(a) for investment (such as import of capital goods, new projects, modernisation/ expansion of existing production units) in real sector - industrial sector including Small and Medium Enterprises (SME) and infrastructure sector - in India.

1[Explanation : The following sectors will qualify as infrastructure sectors, namely,

(a) Energy which will include (i) electricity generation, (A) electricity transmission, (iii; electricity distribution, (iv) oil pipelines, (v) oil/gas/liquefied natural gas (LNG) storage facility (includes strategic storage of crude oil) and (vi) gas pipelines (includes city gas distribution network);

(b) communication which will include (i) mobile telephone service /companies, providing cellular services, (ii) fixed network telecommunication (includes optic fibre/cable networks which provide broadband/internet) and (iii); telecommunication towers;

(c) Transport which will include (i) railways (railway track, tunnel, viaduct, bridges and includes supporting terminal infrastructure such as loading/ unloading terminals, stations and buildings), (ii) roads and bridges, (iii) ports, (iv); inland waterways, (v) airport and (vi) urban public transport (except rolling stock in case of urban road transport);

(d) Water and sanitation which will include (i) water supply pipelines, (ii) solid waste management, (iii) water treatment plants, (iv) sewage projects (sewage collection, treatment and disposal system), (v) irrigation (dams, channels, embankments, etc.) and (vi) storm water drainage system;

(e) (i) mining, (ii); exploration and (iii); refining;

(f) Social and commercial infrastructure which will include (i) hospitals (capital stock and includes medical colleges and para medical training institutes), (ii) Hotel Sector which will include hotels with fixed capital investment of Rs. 200 crore and above, convention centres with fixed capital investment of Rs. 300 crore and above and three star or higher category classified hotels located outside cities with population of more than 1 million (fixed capital investment is excluding of land value), (iii); common infrastructure for industrial parks, SEZs, tourism facilities, (iv) fertilizer (capital investment), (v) post harvest storage infrastructure for agriculture and horticulture produce including cold storage, (vi) soil testing laboratories and (vii) cold chain (includes cold room facility for farm level pre-cooling, for preservation or storage or agriculture and allied produce, marine products and meat;

(g) Any other sectors as prescribed by the Reserve Bank in consultation with Government of India.]

(b) for first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Government's disinvestment programme of PSU shares,

(c) for direct investment in overseas Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad,

1[(d) any other eligible purpose as specified by the Reserve Bank.]

2[(AA) Borrowings in foreign exchange per borrower company per financial year up to such amounts not exceeding US Dollars 500 million or its equivalent as directed by the Reserve Bank from time to time shall be permitted for such permissible end-uses as indicated by Reserve Bank from time to time.]

(B) Other than the purposes specified hereinabove, the borrowings shall not be utilised for any other purpose including the following purposes, namely:

On-lending, investment in capital (stock) market, investment in real estate business, working capital requirements, general corporate purpose, and repayment of rupee loans.

3[***]

4[(v) Maturity - The maturity of the borrowings in foreign exchange shall be as under:

Amount Minimum Maturity Average
(i) Up to USD 20 million or equivalent Not less than 3 years.
(ii) Exceeding USD 20 million or equivalent and upto USD 750 million or equivalent Not less than 5 years

Note - Borrowing up to US$ 20 million can have call/put option provided the minimum average maturity of 3 years as prescribed above is complied with before exercising call/put option.]

(vi) All-in-cost ceilings - The all-in-cost ceilings for the borrowing in foreign exchange shall be specified by the Reserve Bank from time to time

(vii) Security - The borrower shall be at liberty to provide security to the lender/suppliers, provided that-

(a) Where the security is in form of immovable property in India or shares of a company in India, it shall be subject to Regulation 8 of Notification No. FEMA 21 /2000-RB, dated May 3, 2000 and Regulation 3 of Notification No. FEMA 20/2000-RB, dated May 3, 2000, respectively.

(b) Guarantee - Banks, financial institutions and Non-Banking Finance Companies shall not provide (issue) guarantee or Letter of Comfort or Standby Letter of Credit in favour of overseas lender on behalf of their constituents for their borrowings in foreign exchange.

(viii) Prepayment - Notwithstanding the provisions of clause (v) above, prepayment of outstanding foreign currency loan may be made as per the directives issued by the Reserve Bank from time to time.

1[(ix) Parking of loan amount - The proceeds of borrowings in foreign exchange availed under the schedule may, pending utilisation for permissible end-uses, be parked abroad or in India as directed by the Reserve Bank from time to time.]

(x) Loan Agreement- The loan agreement entered into by the borrower with the overseas lender shall strictly conform with these Regulations. The procedure for obtaining loan registration number would be prescribed by the Reserve Bank.

(xi) Drawal of Loan - Draw-downs of borrowing in foreign exchange shall be made strictly in accordance with the terms of the loan agreement only after obtaining the loan registration number from the Reserve Bank.

(xii) Reporting - The borrower shall adhere to the reporting procedure as specified by the Reserve Bank from time to time.

(xiii) Debt Servicing - The designated Authorised Dealer (AD) shall have the general permission to make remittances of principal, interest and other charges in conformity with the guidelines on borrowing in foreign exchange from overseas, issued by Central Government/the Reserve Bank from time to time.

2. Refinancing of existing borrowing in foreign exchange

(i) Refinancing of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made there under, may be made by making fresh borrowing in foreign exchange in accordance with this Schedule provided that there is reduction in cost of borrowing and the outstanding maturity of the original borrowing is not reduced.

(ii) Provisions of sub-paragraphs (ii) and (v) of paragraph 1 shall not apply to the borrowings made under clause 2(i).

2[3. Foreign currency borrowings by successful bidders of 2G spectrum reauction

(i) The successful bidders can avail of foreign currency borrowing in the nature of bridge finance for the purpose of making upfront payment towards spectrum allocation and refinance the same by making fresh borrowing in foreign exchange in accordance with the Act or the Rules and Regulations made there under in accordance with this Schedule, subject to satisfying the terms and conditions as may be specified by the Reserve Bank, from time to time in this regard.

(ii) Provisions of sub-paragraph (v) of paragraph 1 shall not apply to the foreign currency borrowing in the nature of bridge finance made under para 3(i).

(iii) The restriction of repayment of Rupee loans as specified in clause (B) in sub-paragraph (iv) of paragraph 1 shall not apply to the foreign currency borrowing availed of for refinancing domestic borrowings for making upfront payment towards spectrum allocation.

(iv) Such foreign currency borrowings can also be availed of from the ultimate parent company subject to satisfying the terms and conditions as may be specified by the Reserve Bank, from time to time in this regard.]

1SCHEDULE II

[See Regulation 6(2)]

Borrowings in Foreign Exchange under the Approval Route

(1) The borrowing in foreign currency (other than the borrowings under Schedule I by a person resident in India may be made under any of the types set out in this Schedule.

(2) The application for the approval of the Reserve Bank under regulation 6(2) for borrowing under any of the types where its approval is required shall be made in the Form as specified by the Reserve Bank from time to time.

(3) The borrowing in foreign exchange by a person resident in India under the Approval Route is subject to the terms and conditions set out in this Schedule.

(i) Eligibility - The following entities shall be eligible to apply for foreign currency borrowings under the Approval Route-

(a) Any corporate registered under the Companies Act, 1956.

(b) Financial institutions dealing exclusively with infrastructure or export finance such as IDFC, IL& FS, Power Finance Corporation, Power Trading Corporation, IRCON and Exim Bank.

(c) Banks and financial institutions which had participated in the textile or steel sector restructuring package as approved by the Central Government.

(d) Entities falling outside the purview of the Automatic Route as per Schedule I.

2[(e) Any other entity as specified by the Reserve Bank.]

(ii) Lenders - The borrowings in foreign currency by way of issue of bonds, floating rate notes or other debt instruments by whatever name called may be made from-

(a) International bank or export credit agency or international capital market, or

(b) Multilateral financial institutions, namely, IFC, ADB, CDC etc., or

(c) Foreign collaborator or foreign equity holder as specified by the Reserve Bank, or

(d) Supplier of equipments provided the amount of loan raised does not exceed the total cost of the equipment being supplied by the lender, or

(e) Any other eligible entity as prescribed by the Reserve Bank in consultation with Government of India.

(iii) Purpose (End-use)

(A) Borrowings in foreign exchange in terms of this Schedule may be for any of the following purposes, namely:-

(a) for investment (such as import of capital goods, new projects, modernisation/ expansion of existing production units) in real sector - industrial sector including small and medium enterprises (SME) and infrastructure sector - in India.

1[Explanation : The following sectors will qualify as infrastructure sectors, namely,

(a) Energy which will include (i) electricity generation, (ii) electricity transmission, (iii) electricity distribution, (iv) oil pipelines, (v) oil/gas /liquefied natural gas (LNG) storage facility (includes strategic storage of crude oil) and (vi) gas pipelines (includes city gas distribution network);

(b) Communication which will include (i) mobile telephony services /companies providing cellular services, (ii) fixed network telecommunication (includes optic fibre/cable networks which provide broadband/internet) and (iii) telecommunication towers;

(c) Transport which will include (i) railways (railway track, tunnel, viaduct, bridges and includes supporting terminal infrastructure such as loading/ unloading terminals, stations and buildings), (ii) roads and bridges, (iii) ports, (iv) inland waterways, (v) airport and (vi) urban public transport (except rolling stock in case of urban road transport);

(d) Water and sanitation which will include (i) water supply pipelines, (ii) solid waste management, (iii) water treatment plants, (iv) sewage projects (sewage collection, treatment and disposal system), (v) irrigation (dams, channels, embankments, etc.) and (vi) storm water drainage system;

(e) (i) mining, (ii) exploration and (iii) refining;

(f) Social and commercial infrastructure which will include (i) hospitals (capital stock and includes medical colleges and para medical training institutes), (ii) Hotel Sector which will include hotels with fixed capital investment of Rs. 200 crore and above, convention centres with fixed capital investment of Rs. 300 crore and above and three star or higher category classified hotels located outside cities with population of more than 1 million (fixed capital investment is excluding of land value), (iii) common infrastructure for industrial parks, SEZs, tourism facilities, (iv) fertilizer (capital investment), (v) post harvest storage infrastructure for agriculture and horticulture produce including cold storage, (vi) soil testing laboratories and (vii) cold chain (includes cold room facility for farm level pre-cooling, for preservation or storage or agriculture and allied produce, marine products and meat;

(g) Any other sectors as prescribed by the Reserve Bank in consultation with Government of India;]

(b) for first stage acquisition of shares in the disinvestment process and also in the mandatory second stage offer to the public under the Government's disinvestment programme of PSU shares;

(c) for direct investment in overseas Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad.

1[(AA) Borrowings in foreign exchange per borrower company per financial year up to such amounts as directed by the Reserve Bank from time to time shall be permitted for such permissible end-uses as indicated by Reserve Bank from time to time.]

(B) Other than the purposes specified hereinabove, the borrowings shall not be utilised for any other purpose including the following purposes, namely:-

On-lending, investment in capital (stock) market, investment in real estate business, working capital requirements, general corporate purpose and repayment of Rupee loans.

2[***]

3(iv) Maturity - (a) The maturity of borrowings in foreign exchange shall be as under :

Amount Average Maturity
(i) Upto USD 20 million or equivalent Not less than 3 years
(ii) Exceeding USD 20 million or equivalent Not less than 5 years;

(b) Borrowings upto USD 20 million can have call/put option provided the minimum average maturity of 3 years as prescribed in clause (a) is complied with before exercising call/ put option.]

(v) All-in-cost ceilings - The all-in-cost ceilings for the borrowing in foreign exchange shall be specified by the Reserve Bank from time to time.

(vi) Security - The borrower shall be at liberty to provide security to the lender/suppliers, provided that-

(a) Where the security is in form of immovable property in India or shares of a company in India, it shall be subject to regulation 8 of Notification No. FEMA 21 /2000-RB, dated May 3, 2000 and regulation 3 of Notification No. FEMA 20/2000-RB, dated May 3, 2000, respectively.

(b) Guarantee - Banks, financial institutions and Non-Banking Finance Companies shall not provide (issue) guarantee or Letter of Comfort or Standby Letter of Credit in favour of overseas lender on behalf of their constituents for their borrowings in foreign exchange.

Exception 1[1] - Banks, financial institutions and Non-Banking Finance Companies shall be permitted to provide Bank Guarantee, or Letter of Comfort or Standby Letter of Credit in favour of Small and Medium Enterprises (SMEs) with the approval of the Reserve Bank.

1[Exception 2 - Banks may provide Bank Guarantee, Standby Letter of Credit, Letter of Undertaking or Letter of Comfort in respect of ECB by textile companies for modernisation or expansion of their textile units, with the approval of the Reserve Bank.]

(vii) Prepayment- Notwithstanding the provisions of clause (iv) above, prepayment of outstanding foreign currency loan may be made as per the directives issued by the Reserve Bank from time to time.

2[(viii) Parking of loan amount - The proceeds of borrowings in foreign exchange availed under the schedule may, pending utilisation for permissible end-uses, be parked abroad or in India as directed by the Reserve Bank from time to time.]

(ix) Loan Agreement - The loan agreement entered into by the borrower with the overseas lender shall strictly conform with these Regulations. The procedure for obtaining loan registration number would be as specified by the Reserve Bank.

(x) Drawal of loan - Draw-downs of borrowing in foreign exchange shall be made strictly in accordance with the terms of the loan agreement only after obtaining the loan registration number from the Reserve Bank.

(xi) Reporting - The borrower shall adhere to the reporting procedure as specified by the Reserve Bank from time to time.

(xii) Debt Servicing - The designated Authorised Dealer (AD) shall have the general permission to make remittance of principal, interest and other charges in conformity with the guidelines on borrowing in foreign exchange from overseas issued by Central Government/the Reserve Bank from time to time.

1(xiii) foreign currency borrowings for low cost affordable housing projects

Developers/builders, Housing Finance Companies (HFCs) and National Housing Bank (NHB) shall avail of foreign currency loans in accordance with the Act or the Rules and Regulations made there under in accordance with this Schedule, for financing developers/prospective owners of low cost affordable housing projects/units subject to the terms and conditions as may be specified by the Reserve Bank, from time to time in this regard.]

2[(xiv) Rescheduling of an existing Foreign Currency Borrowing Rescheduling of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made there under, may be made in accordance with this Schedule at a higher cost of borrowing within the all-in-cost ceiling prescribed by the Reserve Bank, under subparagraph (v), from time to time.]

(4) Refinancing of existing borrowing in foreign exchange

3[(i) Refinancing of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made there under, may be made by making fresh borrowing in foreign exchange in accordance with this Schedule at a higher cost of borrowing within the all-in-cost ceiling prescribed by the Reserve Bank from time to time, under sub-paragraph (v) of paragraph (3) and the outstanding maturity of the original borrowing is not reduced.]

(ii) Provisions of sub-paragraph (iv) of paragraph 3 shall not apply to the borrowings made under clause 4(i).

(5) 4[***]

5SCHEDULE III

[See Regulation 6(3)]

Trade Credit

6[(1)] Foreign currency credit/loan extended for imports into India by the overseas supplier, bank and financial institution, is hereinafter referred to as 'Trade Credit'-

(a) for original maturity of up to five years, subject to the terms and conditions as may be stipulated by the Reserve Bank from time to time, in respect of a company resident in India engaged exclusively in the development of infrastructure;

(b) for original maturity of less than three years in respect of other resident entities. Depending upon the source of finance, such trade credit includes suppliers' credit or buyers' credit.

Explanation : For the purpose of this regulation, 'infrastructure' means infrastructure as defined under the External Commercial Borrowing (ECB) policy from time to time.]

1[(2) Authorised Dealers (ADs) in foreign exchange are permitted to approve trade credits up to USD 20 million per import transaction for import of all items permissible under the Foreign Trade Policy (except Gold) with a maturity period (from the date of shipment) up to one year. For import of capital goods, ADs are permitted to approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and up to five years in respect of a company resident in India engaged exclusively in the development of infrastructure and less than three years in respect of other resident entities. No roll-over/'extension will be permitted by the AD beyond the permissible period.]

(3) Trade Credit exceeding USD 20 million per import transaction will require the prior approval of the Reserve Bank of India.

 

FORM ECB

Application for permission to raise External Commercial Borrowings under Short Term Loan/Credit/USD 5/10 million Scheme

 

*LATEST CLARIFICATIONS: See AP (DIR Series) (2004-05) Circular No. 40, dated 25-4-2005 and AP (DIR Series) (2005-06), Circular No. 5, dated 1-8-2005, No. 15, dated 4-11-2005 and No. 23, dated 23-1-2006.

See AP (DIR Series) (2006-07) Circular No. 44, dated 30-4-2007 and Circular No. 60, dated 21-5-2007.

See AP (DIR Series) (2007-08) Circular No. 4, dated 7-8-2007, Circular No. 10, dated 26-9-2007, Circular No. 17, dated 6-11-2007, Circular No. 42, dated 28-5-2008, Circular No. 43, dated 29-5-2008 and Circular No. 46, dated 2-6-2008.

See AP (DIR Series) (2008-09) Circular No. 1, dated 11-7-2008, No. 16, dated 22-9-2008, No. 20, dated 8-10-2008, No. 23, dated 15-10-2008, No. 26, dated 22-10-2008, No. 27, dated 27-10-2008, No. 46, dated 2-1-2009, No. 64, dated 28-4-2009 and No. 71 (2008-09), dated 30-6-2009.

See AP (DIR Series) (2009-10) Circular No. 19, dated 9-12-2009, Circular No. 28, dated 25-1-2010, Circular No. 33, dated 9-2-2010, Circular No. 38, dated 2-3-2010, Circular No. 39, dated 2-3-2010, Circular No. 40, dated 2-3-2010 and Circular No. 51, dated 11-5-2010.

See AP (DIR Series) (2010-11) Circular No. 4, dated 22-7-2010, Circular No. 7, dated 9-8-2010 and Circular No. 8, dated 12-8-2010.

See AP (DIR Series) (2011-12) Circular No. 1, dated 4-7-2011, Circular No. 11, dated 7-9-2011, Circular No. 25, dated 23-9-2011, Circular No.26, dated 23-9-2011, Circular No. 27, dated 23-9-2011, Circular No.28, dated 26-9-2011, Circular No. 29, dated 26-9-2011, Circular No. 30, dated 27-9-2011, Circular No. 51, dated 23-11-2011, Circular No. 52, dated 23-11-2011, No. 59, dated 19-12-2011, No. 64, dated 5-1-2012, Nos. 69 & 70, dated 25-1-2012, No. 75, dated 7-2-2012, No. 85, dated 29-2-2012, No. 95, dated 21-3-2012, No. 99, dated 30-3-2012, No. Ill, dated 20-4-2012, No. 112, dated 20-4-2012, No. 113, dated 24-4-2012, No. 119, dated 7-5-2012, No. 134, dated 25-6-2012 and No. 136, dated 26-6-2012.

See also AP (DIR Series) (2012-13) Circular No. 1, dated 5-7-2012; Circular No. 26, dated 11-9-2012; Circular No. 27, dated 11-9-2012; Circular No. 28, dated 11-9-2012; Circular No. 39, dated 9-10-2012; Circular No. 40, dated 9-10-2012; Circular No. 48, dated 6-11-2012, Circular No. 54, dated 26-11-2012, Circular No. 60, dated 14-12-2012, Circular No. 61, dated 17-12-2012, Circular No. 69, dated 7-1-2013, Circular No. 76, dated 17-1-2013, Circular No. 78, dated 21-1-2013, Circular No. 86, dated 1-3-2013, Circular No. 87, dated 5-3-2013, Circular No. 113, dated 24-6-2013, Circular Nos. 114 to 117, dated 25-6-2013 and Circular Nos. 118 to 120, dated 26-6-2013.

See also AP (DIR Series) (2013-14) Circular No. 6, dated 8-7-2013, Circular No. 10, dated 11-7-2013, Circular No. 11, dated 11-7-2013, Circular No. 12, dated 15-7-2013, Circular No. 31, dated 4-9-2013, Circular No. 40, dated 10-9-2013, Circular No. 48, dated 18-9-2013, Circular No. 54, dated 25-9-2013, Circular No. 57, dated 30-9-2013, Circular No. 58, dated 30-9-2013, Circular No. 59, dated 30-9-2013 and Circular No. 61, dated 10-10-2013.

MASTER CIRCULAR : Nos. 5, 12 and 14/2013-14, dated 1-7-2013.

1. Words "EEFC Account or" omitted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2000, w.e.f. 14-8-2000.

2. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2003, w.ei. 10-1-2003.

1. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Fifth Amendment) Regulations, 2013, w.e.f. 26-9-2013.

2. Substituted for "fifty per cent" by the FEM (Borrowing or Lending in Foreign Exchange) (Fourth Amendment) Regulations, 2013, w.e.f. 5-9-2013. Earlier "fifty per cent" was substituted for "twenty-five" by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2009, w.r.e.f. 15-10-2008 and "twenty-five" was substituted for "fifteen" by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2002, w.e.f. 29-4-2002.

3. Omitted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2005, w.r.e.f. 24-3-2004. Prior to its omission, clause (ii) read as under :

"(ii) An authorised dealer may borrow in foreign currency without limit from his Head Office or branch or correspondent outside India for the purpose of replenishing his rupee resources, provided that-

(a) the funds borrowed are utilised for his own business operations and are not invested in call money or similar other markets;

(b) no repayment of the loan is made without the prior approval of Reserve Bank, which may be granted only if the authorised dealer has no borrowings outstanding either from Reserve Bank or other bank or financial institution in India and is clear of all money market borrowings for a period of at least four weeks prior to the week in which the repayment is made."

4. Existing clauses (iii) and (iv) renumbered as (ii) and (iii) by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2005, w.r.e.f. 24-3-2004.

1. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2004, w.e.f. 6-3-2004. Prior to its substitution, it read as under :

"Provided that,—

(a) the aggregate amount of such loans outstanding at any point of time does not exceed US $ 3 million; and

(b) where the amount of loan exceeds US $ 25,000, a guarantee of a bank of international repute situated outside India is provided by the overseas borrower in favour of the lender."

2. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2002, w.e.f. 1-11-2002.

3. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2003, w.e.f. 8-1-2003.

4. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004. Prior to its substitution, it read as under :

"6. Other borrowings in foreign exchange with prior approval of Reserve Bank or Government of India.-(1) A person resident in India who desires to raise foreign currency loans of the nature or for the purposes specified in the Schedule and who satisfies the eligibility and other conditions specified in that Schedule, may apply to the Reserve Bank for approval to raise such loans."

1. Sub-regulation (2) renumbered as sub-regulation (4) by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004.

2. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004.

3. Sub-regulation (3) renumbered as sub-regulation (5) by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004.

4. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004. Prior to its substitution, it read as under:

"Any other foreign currency loan proposed to be raised by a person resident in India, which falls outside the scope of the Schedule, shall require the prior approval of the Central Government."

5. Schedule I to Schedule III substituted for Schedule by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004. [Schedule I is effective from 1-2-2004, except item 1(iv)(A)(c) which comes into force from 23-2-2004]. Prior to its substitution, Schedule was amended by the FEM [Withdrawal of General Permission to Overseas Corporate Bodies (OCBs)] Regulations, 2003, w.e.f. 3-10-2003 and FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2002, w.e.f. 1-11-2002.

6. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2005, w.r.e.f. 25-4-2005. Prior to their substitution, sub-paragraphs (i) and (ii), read as under :

"(i) Eligibility - Any corporate registered under the Companies Act, 1956 shall be eligible to borrow in terms of this Schedule. However, financial intermediaries (such as banks, Financial Institutions (FIs), housing financing companies, Non-Banking Finance Companies, Trusts, Non-Profit making Organisations (NPOs), Micro Finance Institutions, proprietorship/partnership concerns and individuals) are not eligible to borrow under the Automatic Route.

(ii) Amount- The borrowing in foreign exchange under the Automatic Route whether raised in tranches or otherwise shall not exceed US$ 500 million in any one financial year (April-March)."

7. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2013, w.e.f. 6-2-2013. Prior to its substitution, the said proviso, as inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2009, w.r.e.f. 30-6-2009, read as under :

"Provided that they have not at any time violated any of the provisions of these regulations and no investigation is pending against them for contravention of the provisions of these regulations under the Act."

1. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2012, w.r.e.f. 19-12-2011. Prior to its substitution, clause (b), as amended by the FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2009, w.r.e.f. 30-6-2009, read as under:

"(b) Non-Government Organisations engaged in micro-finance activities may borrow in foreign exchange under this Schedule under such terms and conditions as specified by the Reserve Bank from time to time:

Provided that they have not at any time violated any of the provisions of these regulations and no investigation is pending against them for contravention of the provisions of these regulations under the Act."

2. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2013, w.e.f. 6-2-2013. Prior to its substitution, the said proviso, as substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2012, w.r.e.f. 19-12-2011 and FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2009, w.r.e.f. 30-6-2009, read as under :

"Provided that they have not at any time violated any of the provisions of these regulations and no investigation is pending against them for contravention of the provisions of these regulations under the Act."

3. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2013, w.e.f. 6-2-2013. Prior to its substitution, the said proviso, as inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2009, w.r.e.f. 30-6-2009, read as under :

"Provided that they have not at any time violated any of the provisions of these regulations and no investigation is pending against them for contravention of the provisions of these regulations under the Act."

4. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2012, w.r.e.f. 19-12-2011. Prior to its substitution, clause (b) read as under :

"(b) The borrowings in foreign currency under as specified in paragraph (i)(b) of section 1 of Schedule I, by a non-Government organisation engaged in micro-finance activities shall not exceed USD 5 million or equivalent during a financial year (April-March)."

1. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2013, w.e.f. 19-7-2013. Prior to its substitution, Explanation, as substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2009, w.r.e.f. 8-10-2008, read as under :

"Explanation.-The following sectors will qualify as infrastructure sectors, namely : (i) Power, (ii) Telecommunication, (iii) Railways, (iv) Road including Bridges, (v) Sea Port and Airport, (vi) Industrial Parks, (vii) Urban Infrastructure (water supply, sanitation and sewage projects) and (viii) Mining, Exploration and Refining,"

1. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2005, w.r.e.f. 25-4-2005.

2. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2009, w.r.e.f. 29-5-2008. Prior to its substitution, clause (A4) as amended by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 7-8-2007, read as under :

"(AA) Borrowings in foreign exchange upto USD 500 million per borrower company per financial year shall be permitted only for foreign currency expenditure for permissible end-use."

3. Omitted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 21-5-2007. Prior to its omission, it read as under :

"Note - For the purpose of this clause, real estate business shall not include development of integrated township as defined by the Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, SIA (FC Division), Press Note 3 (2002 Series) dated January 4, 2002."

4. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2012, w.r.e.f. 23-9-2011. Prior to its substitution, sub-paragraph (v) read as under :

"(v) Maturity - The maturity of the borrowings in foreign exchange shall be as under:

Amount Minimum Average Maturity
(i) Up to US$ 20 million or equivalent Not less than 3 years.
(ii) Exceeding US$ 20 million and upto US$ 500 million or equivalent Not less than 5 years

Note - Borrowing up to US$ 20 million can have call/put option provided the minimum average maturity of 3 years as prescribed above is complied with before exercising call/put option."

1. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2009, w.r.e.f. 22-10-2008. Prior to its substitution, sub-paragraph (ix), read as under :

'(ix) Parking of loan amount abroad- The proceeds of borrowings in foreign exchange shall be parked abroad until actual requirement in India."

2. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2012, w.ei. 12-11-2012.

1. Schedule I to Schedule III are substituted for Schedule by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004. [Schedule II is effective from 1-2-2004, except item 3(iii)(A)(c) which comes into force from 23-2-2004].

2. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 1-8-2005.

1. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2013, w.e f. 19-7-2013. Prior to its substitution, Explanation, as substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2009, w.r.e.f. 8-10-2008, read as under :

"Explanation .-The following sectors will qualify as infrastructure sectors, namely : (i) Power, (ii) Telecommunication, (iii) Railways, (iv) Road including Bridges, (v) Sea Port and Airport, (vi) Industrial Parks, (vii) Urban Infrastructure (water supply, sanitation and sewage projects) and (viii) Mining, Exploration and Refining;"

1. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2009, w.r.e.f. 29-5-2008. Prior to its substitution, clause (A4) as amended by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 7-8-2007, read as under :

"(AA) External Commercial Borrowings upto USD 20 million per borrowing company per financial year for rupee expenditures for permissible end-use shall require prior approval of the Reserve Bank of India."

2. Omitted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 21-5-2007. Prior to its omission, it read as under :

"Note - For the purpose of this clause, real estate business shall not include development of integrated township as defined by the Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, SIA (FC Division), Press Note 3(2002 Series), dated January 4, 2002."

3. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2012, w.r.e.f. 23-9-2011. Prior to its substitution, sub-paragraph (iv) as substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 4-12-2006, read as under :

"(iv) Maturity-(a) The maturity of borrowings in foreign exchange shall be as under :

Serial Number Amount Average Maturity
(i) Upto US $ 20 million or equivalent Not less than 3 years\
(ii) Exceeding US $ 20 million and upto US $ 500 million or equivalent Not less than 5 years
(iii) Exceeding US $ 500 million and upto US $ 750 million or equivalent More than 10 years;

(b) Borrowings upto US $ 20 million can have call/put option provided the minimum average maturity of 3 years as prescribed in clause (a) is complied with before exercising call/put option;

(c) No prepayment and call/put options shall be permitted for borrowings in foreign exchange exceeding an amount of US $ 500 million and upto an amount of US $ 750 million or equivalent for a minimum average maturity of ten years."

1. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 4-11-2005.

2. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2009, w.r.e.f. 22-10-2008. Prior to its substitution, sub-paragraph (vii), read as under :

"(viii) Parking of loan amount abroad- The proceeds of borrowings in foreign exchange shall be parked abroad until actual requirement in India."

1. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Third Amendment) Regulations, 2012, w.e.f. 27-11-2012.

2. Inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2013, w.r.e.f. 20-4-2012.

3. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2013, w.r.e.f. 20-4-2012. Prior to its substitution, sub-paragraph (i) read as under :

"(i) Refinancing of outstanding amounts of loans raised in foreign exchange in accordance with the Act or the Rules and Regulations made thereunder, may be made by making fresh borrowing in foreign exchange in accordance with this Schedule provided that there is reduction in cost of borrowing and the outstanding maturity of the original borrowing is not reduced."

4. Omitted by the FEM (Borrowing or Lending in Foreign Exchange) (Fourth Amendment) Regulations, 2012, w.r.e.f. 26-9-2011. Prior to its omission, paragraph 5, as inserted by the FEM (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2007, w.r.e.f. 1-8-2005, read as under :

"(5) No corporate registered under the Companies Act, 1956 shall avail domestic rupee denominated structured obligations credit enhanced by international banks, international financial institutions or joint venture partners, except with the prior approval of the Reserve Bank."

5. Schedule I to Schedule III substituted for Schedule by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2004. [Schedule III is effective from 17-4-2004].

6. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2013, w.r.e.f. 11-9-2012. Prior to its substitution, paragraph (1) read as under :

"(1) Foreign currency credit/loan extended for imports into India by the overseas supplier, bank and financial institution for original maturity of less than 3 years is hereinafter referred to as 'Trade Credit' for imports. Depending upon the source of finance, such trade credit includes suppliers' credit or buyers' credit."

1. Substituted by the FEM (Borrowing or Lending in Foreign Exchange) (Second Amendment) Regulations, 2013, w.r.e.f. 11-9-2012. Prior to its substitution, paragraph (2) read as under :

"(2) Authorised Dealers (ADs) in foreign exchange are permitted to approve trade credits up to USD 20 million per import transaction for import of all items permissible under the Foreign Trade Policy (except Gold) with a maturity period (from the date of shipment) upto one year. For import of capital goods, ADs are permitted to approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years. No roll-over/extension will be permitted by the AD beyond the permissible period."

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