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External Commercial Borrowings - Procedures relaxed

10th February, 2012

Designated AD category-I banks have been delegated powers to approve requests for reduction in loan amount of External Commercial Borrowings (ECBs). These banks have also been empowered to consider changes in drawdown schedule where original average maturity period is not maintained and for reduction in all-in-cost of ECB.

Hitherto, AD Category-I banks were required to refer such matters to the Foreign Exchange Department of Reserve Bank of India for necessary approval. RBI’s A.P. (DIR Series) Circular No.75 dated 7-2-2012 issued in this regard, while simplifying the procedure also prescribes certain conditions including filing of ECB-2 monthly returns in respect of the Loan Registration Number. In case of ECBs availed under the automatic route, requests for reduction in the loan amount may be approved by AD Category-I banks if the same has consent of the lender, average maturity period is maintained with no change in other terms and conditions of the borrowing.

 AD Category-I banks can also approve changes in the drawdown schedule resulting in further changes in the original average maturity period for ECBs availed under both automatic and approval routes. For such approval there should not be any modification in the repayment schedule, the average maturity period is reduced as against original average maturity period and such reduced period complies with the stipulated minimum average maturity period. Prior approval of RBI would be required, as at present, for elongation or rollover in repayment, on expiry of the original maturity of the ECB.

As for reduction in all-in-cost of the ECB, such specified banks can grant approval if there is consent of the lender with no other change in terms and conditions.
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