Mumbai: The Reserve Bank of India on Thursday permitted start-ups to raise external commercial borrowings (ECBs) of up to $3 million in a financial year, a move aimed at boosting innovation and promoting job creation.

“The borrowing should be denominated in any freely convertible currency or in Indian Rupees (INR) or a combination thereof." “In case of borrowing in INR, the non-resident lender, should mobilise INR through swaps/outright sale undertaken through bank in India," the RBI said while issuing norms for ECB route for start-ups.

The borrowing per start-up will be limited to $3 million or equivalent per financial year either in Indian rupee or any convertible foreign currency or a combination of both, it said.

The borrowing, RBI added, can be in the form of loans or non-convertible, optionally convertible or partially convertible preference shares and the minimum average maturity period will be 3 years.

ECBs can be raised from a country which is either a member of Financial Action Task Force (FATF) or FATF-Style Regional Bodies.

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However, overseas branches and subsidiaries of Indian banks and overseas wholly-owned subsidiary or joint venture of an Indian company will not be considered as recognised lenders, the RBI added.

India has the third-largest number of start-ups globally. In January, Prime Minister Narendra Modi had unveiled a slew of incentives for them including tax holiday, inspector raj-free regime, capital gains tax exemption and Rs10,000 crore corpus to provide funds.

Government has also relaxed procurement norms for them.