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MUMBAI, April 8

CORPORATES have pre-paid external commercial borrowings (ECBs) amounting to $595 million during the April-December 2002 period, according to a study conducted by the Reserve Bank of India (RBI).

The total pre-payment of ECBs from 2000-01 to 2002-03 (up to December 2002) amounted to $1,106 million.

The reduction of interest burden on account of the pre-payment worked out to about $90 million.

The amount was considerably lower for the 2001-02 and 2000-01 fiscals at $241 million and $270 million respectively.

"... by pre-payment, the borrowers saved interest costs by around 230 basis points in terms of effective rate of interest. The study calculated effective rate of interest taking into account interest rate, maturity period and grace period,'' a RBI release said.

To permit corporates to take advantage of low international interest rates, the RBI had, in September 2002, liberalised the automatic route for pre-payment of ECBs by corporates.

Any borrower was allowed to pre-pay outstanding ECBs up to an amount of $100 million without prior permission from the apex bank.

Further, the ceiling of $100 million for pre-payment of ECBs out of local resources/market purchases was removed with effect from March 1, 2003.

The Government of India had also pre-paid certain high-cost foreign currency loans from the Asian Development Bank (ADB) amounting to $1.36 billion (approximately) and from the World Bank amounting to $1.67 billion (approximately) on February 24, 2003 and February 27, 2003 respectively.

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