Pre-Payment of ECBs

The stipulations relating to prepayments of ECBs, currently in force, are as follows:  (a) Repayment facility upto 100 per cent of outstanding  balance is ‘permitted if they are met out  Of the infl~w of foreign equity or where the source of funds is from EEFC (Exchange Earners Foreign Currency) accounts),  (b) In addition to ECBs being prepaid out of foreign equity, corporates can avail of either of the following two options for prepayment of their ECBs (i) On permission from the Government

 prepayment of all ECBs with residual  maturity up to-one year may be undertaken, within the  permitted period, or (ii) Prepayment upto 10 per cent of outstanding E Bto be  permitted  once during the life of the loan, subject the company-complying with the ECB approval  terms. Companies that have already  availed prepayment facility of zo per cent are not eligible.  ‘(c) Validity of permission under the above two options is’ as under: (i)  repayment   pproval for ECBs, other than bondsidebenturesiFRNs

is 15 days or period-up to next interest payment  date whichever is later; (ii) In case  f hon(l FRNs, validity of permission is not more than 15  days. Prepayment was ‘allowed wuh the prior permission of the ECB sanctioning   authority, that is, the DEA or the RBI. All prepayments are now approved by the RBI as per the prevailing  prepayment guidelines.  Prepayment of ECBs has been delegated to the RBI. Such prepayments  would be permitted without any IiCl)it and also without’ any’ or the   existing conditions, namely, (i) the amount of prepayment of ECB is fully matched by way of inflow  of foreign exchange in the form of  foreign equity in the applicant company, (ii) the prepayment  is made out of the balance held in the EEFC account of the borrower, (iii)   repayment

is made to the extent of 10 per cent of the outstanding loan once during the ‘entire currency  Of the loan and (iv) the residual maturity of the  loan does nOt exceed one year. The automatic route  route is available only’ to borrowers who have complied with all the relevant acts, guidelines,   rules, regulations and/or conditions, if any, of the Government/Rlll while availing of the ECH. The automatic route of prepayment of ECBs   with the RBI’s prior’ permission is , available without any limit for all the four categories listed above, i.e. (i) to (jv) Prepayments  not covered   y the automatic route continue to require the prior approval of the RBI.

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