Consolidation of new ECB and Trade Credit framework: RBI issues Master Direction 2019

Vallari Dubey


With the backdrop of revision of various frameworks for raising funds outside India (other than by way of equity participation), RBI has issued the Master Direction – External Commercial Borrowings, Trade Credits and Structured Obligations on 26th March, 2019, in supersession of the existing Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers dated 1st January, 2016 (last updated on 22nd November, 2018).

The new Master Direction seeks to consolidate all applicable circulars and notifications in respect of the following:

  1. External Commercial Borrowing framework (ECB framework) covered in the Master Direction as Part I
  2. Trade Credit framework covered as Part II
  3. Structured Obligations covered as Part III.

The first set of changes was introduced through the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 on 17th December, 2018. Thereafter, the New ECB framework was issued on 16th January, 2019 and the Trade Credit Policy on 13th March, 2019.

New Master Direction

The erstwhile Master Direction included provisions pertaining to borrowing and lending in foreign currency, which has now been removed and is solely dealt with by Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. Further, it replaces the erstwhile ECB framework and Trade Credit framework with the recently issued frameworks, separately.

The revised ECB policy and Trade Credit Policy were issued, coinciding with Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.

The changes introduced pursuant to new ECB policy and Trade Credit policy have been covered by our colleagues extensively in the following write ups:

  1. RBI revises ECB framework – aligns with FEM (Borrowing and Lending) Regulations, 2018
  2. RBI revises Trade Credit Policy Framework.

Few important additions in the revised frameworks, now consolidated under the Master Directions include Standard Operating Procedure for Untraceable Entities for Ad Banks, ECB for entities under resolution under IBC, ECB for resolution applicants, Late Submission Fee for late submission of returns.


The revision of the Master Direction which was originally issued in 2016 was quite anticipated in light of the recent changes made by RBI. Although the new Master Direction does not introduce any additional change in the ECB and Trade Credit framework, it unifies all the applicable policy frameworks, thereby giving more clarity.

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