Feb 9, 2012

Simplification of Procedure of ECB

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Simplification of Procedure of ECB
Continuing its liberalization drive, the Reserve Bank of India (RBI) has once again come out with new circular for simplification of External Commercial Borrowing Procedure (ECB). The simplification is focused on to delegate powers to Authorized Dealers (ADs) for approving different changes related  to the ECB amount, maturity period etc. so as to reduce the time and other complexities.
As per the existing ECB norms, the requests for reduction in the amount of ECB, changes in the drawdown schedule and reduction in the all-in-cost of the ECB after obtaining the loan registration number (LRN) is required to be referred by the bank concerned to the RBI for necessary approval. But as a measure to simplifying the procedure and resolve things swiftly, the RBI has, vide A.P. (DIR Series) Circular No. 75 dated 7th February, 2012, delegated its powers to approve the above changes to ADs. As a result, Borrowers can now approach the AD Bank for various approvals as per the following table:
Changes Route Conditions
Reduction in loan amount Automatic Route

  1. Lender’s consent has been obtained
  2. Average maturity period is maintained
  3. Monthly ECB-2 returns have been submitted
  4. No other changes

Changes/modifications in the drawdown schedule when original average maturity period is not maintained Automatic and Approval route

  1. No changes in the repayment schedule of the ECB;
  2. The average maturity period of the ECB is reduced as against the original average maturity period stated in the Form 83 at the time of obtaining the LRN;
  3. Such reduced average maturity period complies with the stipulated minimum average maturity period as per the extant ECB guidelines;
  4. The change in all-in-cost is only due to the change in the average maturity period and the ECB complies with the extant guidelines; and
  5. Monthly ECB-2 returns have been submitted.

Reduction in all-in-cost Automatic and Approval route

  1. The consent of the lender has been obtained
  2. Monthly ECB-2 returns have been submitted.
  3. No other changes

Any elongation / rollover in the repayment of the ECB would continue to require the prior approval of the Reserve Bank.
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