What changed
Previously, ECB borrowers had to approach RBI for approval on reducing loan amount (under automatic route), changing drawdown schedules (if average maturity changed), or lowering all-in-cost after obtaining LRN. Now, designated AD Category-I banks can approve these requests directly, provided conditions like lender consent, compliance with maturity norms, and timely ECB-2 returns are met. Note: drawdown changes are allowed only if repayment schedule is unchanged and average maturity is reduced but still meets minimum norms.
What it means for you
Banks can now process common ECB modifications faster, reducing turnaround time for borrowers. This delegation eases RBI's workload and gives AD banks more autonomy, but they must ensure strict compliance with ECB guidelines and report changes promptly to DSIM. Non-compliance could invite regulatory scrutiny.
What you must do
- Update internal ECB processing manuals to reflect delegated powers for loan amount reduction, drawdown changes, and cost reduction.
- Train staff on conditions: lender consent, average maturity compliance, no other term changes, and timely ECB-2 return submission.
- Establish a monitoring mechanism to ensure all approved changes are reported to DSIM via Form 83 promptly.
- Review existing ECB portfolios to identify pending requests that can now be processed internally without RBI referral.
Who it affects
AD Category-I banks handling ECB transactions, ECB borrowers under automatic and approval routes, RBI's Foreign Exchange Department (reduced referral volume)
Can we approve a reduction in ECB loan amount for any borrower?
No, only for ECBs availed under the automatic route, provided lender consent is obtained, average maturity period is maintained, ECB-2 returns are filed, and no other terms change.
What if the borrower wants to extend the repayment beyond original maturity?
Any elongation or rollover on expiry of original maturity still requires prior RBI approval. This delegation does not cover that. Also, for drawdown schedule changes, the repayment schedule must remain unchanged.