Hitherto, companies that are under investigation by law enforcement agencies such as the Directorate of Enforcement are not entitled to taken on external commercial borrowings (ECBs) under the automatic route, and are required to approach the Reserve Bank of India (RBI) for approval.
Through a recent circular, the RBI has relaxed such position. Now, such entities under investigation are eligible to avail of ECBs under the automatic route. Where the pendency of investigation is disclosed by the borrowing entity, the authorized dealers approving the proposal must highlight this fact to the RBI.
This liberal approach reinforces the well-known principle of presumption of innocence.