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RBI announces automatic route for prepayment of ECBs

The Reserve Bank of India on Monday announced the introduction of an automatic route for prepayment of external commercial borrowings with simplification of procedures for the corporate sector and institutions.

In a circular, the RBI said that the scheme would be available on an experimental basis up to March 31, 2003, after which either a new circular would be issued or an extension of the scheme would be notified for a further period.

The automatic route scheme would be available to the companies whose prepayment of ECBs is fully matched by way of inflow of foreign exchange in the form of foreign investment or whose prepayment of ECBs was being made out of the balance held in the export earner's foreign currency account of the borrower.

In case of prepayment of ECB to the extent of 10 per cent of the outstanding loan and also where the residual maturity of the loan does not exceed one year, the borrowers would be allowed to prepay the loans up to an amount not exceeding $50 million without prior permission of the RBI.

The RBI would, however, also expeditiously consider applications for prepayment of amounts exceeding $50 million, particularly in cases where such loans were contracted at very high interest rates.

All authorised dealers were asked to report to the RBI full details of the prepayment in the prescribed form within seven days of the remittances.

UNI

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