The Reserve Bank of India has doubled the prepayment of external commercial borrowings (ECBs) under the automatic route to $100 million without any condition and without its prior permission.
This facility, which will be available up to March 31, 2003, will allow corporates to take advantage of low international interest rates. Earlier, this facility was available for the prepayment up to $50 million, subject to conditions like residual maturity not exceeding one year.
Further in the case of prepayment of external commercial borrowings exceeding $100 million, the RBI will expeditiously consider applications for approval.
The RBI move follows the government liberalising the guidelines for external commercial borrowings to allow 100 per cent prepayment of outstanding commercial debt by companies and also utilisation of external commercial borrowing proceeds for investment in the real estate sector.
The Centre also allowed companies located in the special economic zones to access ECB funds without any restrictions on maturity.
The central bank said the liberalised automatic route would be available to all category of borrowers, irrespective of the residual maturity or percentage of the outstanding loan, as long as the prepayment did not exceed $100 million.
In case of ECB prepayments exceeding $100 million, corporates desirous of obtaining "in principle" approval from the RBI before negotiating a prepayment contract may also approach the apex bank.
The "in principle" approvals by the RBI will be valid for 15 days. No prior permission or "in principle" approval of the RBI will be required for prepayment of ECBs out of balances held in exchange earners' foreign currency accounts or foreign direct inflow receipts, even if the amount exceeds $100 million.
