EOUs/EPZ units, as well as other units capable of generating net foreign exchange (NFE) earnings, can raise foreign currency loans for capital goods, raw materials, components, technology payments or even for financing the local rupee cost of the project.
Such loans are to be repaid from NFE earnings of the project and hence borrowers are not permitted to provide any guarantee for repayment from Indian banks, financial instititions or branches of foreign banks. A minimum maturity period of 2 years is required for such loans. The permissible interest payable on foreign currency loans is the prime rate in force in the currency of the loan, or six months floating rate plus a reasonable spread, which ever is higher.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.