RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001

Date : Sep 16, 2002

Prepayment of ECB under Automatic Route raised
to US$ 100 million without any condition

Consequent to the Government of India’s Press Release dated September 15, 2002, the Reserve Bank of India has further liberalised the Automatic Route for prepayment of External Commercial Borrowings (ECBs).

Any borrower who has raised ECBs in accordance with the prevalent Rules/ Regulations/ Guidelines may prepay, the outstanding ECB upto an amount of US$100 million without prior permission from the Reserve Bank. The Reserve Bank has issued this instruction in supercession of its earlier instructions in order to permit the corporates to take advantage of low international interest rates.

It is clarified that this liberalised Automatic Route is available to all category of borrowers irrespective of the residual maturity or percentage of the outstanding loan, as long as the amount being prepaid does not exceed US$100 million. Earlier, this facility was available for prepayment upto US$50 million subject to certain conditions, such as, residual maturity not to exceed one year, etc.

Designated branches of authorised dealers may, accordingly, allow such remittances for prepayment of ECBs, after obtaining a certificate from auditors that the applicant has availed of the ECB in accordance with all relevant Acts, Rules/Regulations and Guidelines.

Authorised dealers are required to report to the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai, full details of the prepayment in the prescribed form within seven days of the remittance, as detailed in the circular being issued separately.

The Reserve Bank will expeditiously consider applications for prepayment of amount exceeding US$100 million for approval. Borrowers desirous of availing of the facility may apply to the Reserve Bank, Central Office, Mumbai with full particulars, namely, terms of the prepayment, the period over which the prepayment is to be made and also whether ‘in principle’ contract for prepayment has been negotiated with the lender.

Further, corporates desirous of obtaining ‘in principle’ approval from the Reserve Bank before negotiating a pre-payment contract may also approach the Reserve Bank. The ‘in principle’ approvals issued by the Reserve Bank will be valid for 15 days.

No prior permission or ‘in principle’ approval of the Reserve Bank will be required for prepayment of ECBs out of balances held in Exchange Earners’ Foreign Currency (EEFC) accounts or foreign direct inflow receipts, even if the amount exceeds US$ 100 million.

This facility under the Automatic Route for prepayment of ECBs will be available upto March 31, 2003. New instructions will be issued on or before that date in case the scheme is extended for a further period.

Press Release:2002-2003/294