Companies seeking to finalize their projects by commercial borrowings from foreign lenders including multilateral agencies, international organizations and commercial banks require Indian regulatory approvals. Typically, the approval of the Department of Economic Affairs, Ministry of Finance, is a starting point. Besides conveying the "in principle" approval of the loan it also deals with the basic parameters of the loan including interest and other payments, repayment, security, currency and other charges including default interest. Where international organizations involved are qualified for tax exemption on the interest earned, it is so indicated in the approval. This approval is followed by a more detailed approval from the Reserve Bank of India under the FERA dealing with various detailed terms of the lending arrangement. In cases where the loan has to be swapped, a separate set of approvals is essential, from the government and the Reserve Bank of India.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.