The Hindu Business Line : Micro financing — NGOs can raise ECB up to $5 m

THE Reserve Bank of India (RBI) has allowed non-government organisations (NGOs) involved in micro-finance activities, to go in for external commercial borrowings up to $5 million under the automatic route.

In order to be eligible for ECB, the NGO should have a satisfactory borrowing relationship for three years with a bank. RBI has mandated that the board or managing committee of the NGO should be certified as `fit and proper.'

RBI has also said in its directive that designated authorised dealer must ensure that the ECB proceeds are used for lending to self-help groups or for bona fide micro finance activity.

NGOs are expected to route their ECB funds through normal banking channel. The apex bank has asked NGOs to avail themselves of ECB funds from internationally recognised sources such as international banks, multilateral financial institutions and export credit agencies.

Other sources that NGOs can tap for raising money include overseas organisations and individuals complying with Know Your Customer (KYC) guidelines and Anti-Money Laundering (AML) safeguards.

The directive further states that all other ECB parameters such as minimum average maturity, all-in-cost ceilings, issuance of guarantee, choice of security, parking of ECB proceeds, prepayment, refinancing of ECB and reporting arrangements under the Automatic Route should be complied with.

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