(i) Application for repayment of the loan/credit and/or any other charges connected with the loan/credit is required to be made by the borrower in form ECB 3 to the authorised dealer. The authorised dealer in turn should refer the application to Reserve Bank, together with appropriate supporting documents, sufficiently in advance to avoid payment of additional charges by way of overdue/penal interest.
(ii) Reserve Bank has been granting general permission to the authorised dealer designated by the borrower to effect remittances towards repayment of the loan where it is satisfied that the loan amount has been fully utilised and the required documentary evidence regarding utilisation of the loan has been submitted. Under the revised procedure effective June 1997, Reserve Bank would grant general permission for repayment of the loan/credit to the branch of the authorised dealer i.e. designated bank indicated by the borrower in the application in form ECB 1, at the time of granting permission to effect drawal of the loan (cf. paragraph 7B2). The borrowers should approach the same designated branch for making all future remittances connected with the loan as per terms approved by Reserve Bank/Government of India. In cases where Reserve Bank has granted such general permission, applications for repayment of loan and interest thereon should be made to the designated authorised dealer and the designated authorised dealer may make the remittance subject to compliance with the conditions stipulated in the letter of approval issued by the Government/Reserve Bank and after ensuring that the borrower has submitted the statement in form ECB 2 to Reserve Bank for the last quarter and obtained the acknowledgment therefor (cf. paragraph 7 B6)
(iii)(a) Applications for remittance towards penal interest in case of default in making repayment of principal amount/payment of interest on due date in Form ECB 3 should be made to the designated branch of authorised dealer indicated in ECB 1 at the time of granting permission to effect the drawal of the loan. In case where general permission facility has not been availed of by the borrower, he can approach the authorised dealer through whom he is making debt servicing payments.
(b) The penal interest may be allowed as per the rate indicated in the approval letters issued by the Government/Reserve Bank. In case no rate is mentioned in such approval letters, the authorised dealers may allow the payment of penal interest based on the rate indicated in the relative debit note/invoice raised by the lender, subject to the ceiling of 2% per annum, besides the normal approved interest, provided the relative loan agreement taken on record by the Government/Reserve Bank contains the provision for payment of penal interest. In case of defaults by the borrowers on three consecutive occasions, authorised dealers should report the same, with full details, to the concerned Regional Office of Reserve Bank.
(c) The borrower should report the payment of penal interest in form ECB 2 to be submitted to Reserve Bank on quarterly basis against column marked "others" in item No.7.
(d) The authorised dealer should allow the remittances of interest, penal interest and other charges only after the borrower has submitted an Undertaking and Accountants certificate in compliance with Income-tax provisions.
(iv) Applications for remittance towards prepayment of outstanding ECB which was earlier approved by the Government of India, should be made to the designated branch of authorised dealer through whom the borrower is making debt servicing payments, together with the Government approval in original for prepayment of outstanding ECB. The designated branch of authorised dealer may effect the remittance on behalf of their constituent borrower based on the Government approval, under advice to the concerned Regional Office of Reserve Bank quoting the Registration number of the loan.
In case of prepayment of outstanding ECB approved by Reserve Bank, the borrower is required to submit an application for prepayment of loan to the Reserve Bank of India, Exchange Control Department, Central Office (ECB Division), Mumbai through the designated branch of an authorised dealer together with the following documents:-
(a) A certificate from Statutory Auditor to the effect that the ECB proceeds have been utilised for the purpose for which ECB was sanctioned.
(b)Acknowledgement from the concerned Regional Office of Reserve Bank for having received ECB-2 statement for the last quarter.
The designated authorised dealer may effect the remittance towards prepayment of ECB based on the approval granted by Reserve Bank under advice to the concerned Regional Office of Reserve Bank quoting the Registration number allotted for the loan.
(v) The borrowers of foreign currency loan/credit are not permitted to use balances in their foreign currency accounts maintained in India or abroad as per Reserve Banks specific/general permission for repayment/payment of principal/interest and any other charge connected with the loan/credit unless (a) specific application for the proposed repayment/payment in form ECB 3 has been made to Reserve Bank and approval obtained from Reserve Bank (where necessary) or to the authorised dealer, as the case may be, (b) a statement in form ECB 2 for the last calendar quarter has been submitted to Reserve Bank and its acknowledgement obtained and (c) Reserve Bank has granted approval for debt servicing out of funds held in the foreign currency account.
(vi) The designated bank should maintain proper records for each foreign currency loan/credit handled by it and record therein all essential particulars of the amount of loan/credit raised, repaid and outstanding including those remittances made through other authorised dealers. Head Offices of authorised dealers should evolve a suitable system for maintenance of records and supervision over remittances under foreign currency loan/credit.
(vii) At times borrowers desire to make remittance towards repayment of the loan or interest through an authorised dealer other than the designated one in order to take advantage of the finer exchange rate available in the forex market. In such cases, the borrower should submit his application for remittance to the designated bank in form ECB 3 together with all the relevant documents and obtain a letter from it in favour of the authorised dealer through whom he proposes to effect the remittance, along with form A 2 under proper authentication by the designated bank. The borrower may then submit the letter and form A2 to the remitting bank for making the remittance. The remitting bank should certify the form A2 after effecting the remittance and forward the same to Reserve Bank along with the relevant R Return. It should also separately send a certificate to the designated bank indicating complete details of the remittance (the name of the remitter and the beneficiary, currency and amount remitted as also date and the purpose of the remittance) to enable the latter to maintain proper record of remittances made. On receipt of the certificate from the remitting bank, the designated bank should verify the particulars of the remittance made and retain the certificate for its record. The designated branch should not allow any subsequent remittance either by itself or through another authorised dealer, if a proper certificate from the remitting bank has not been received for the previous remittance.
(viii) The applicant borrowers who are permitted to remit the principal amount and interest in connection with their foreign currency borrowings through designated bank should submit the statement in form ECB 2 to the office of Reserve Bank positively within the prescribed period. In case of failure of submission of statement as stated above, Reserve Bank may be constrained to withdraw the facility of general permission granted for remittances to be made through the designated bank and the applicant would have to seek specific permission each time from Reserve Bank.
(ix) Reserve Bank attach great importance to statement in form ECB 2 with a view to monitoring etc. of foreign currency borrowings. In the case of persistent default in timely submission of statement in form ECB 2 to Reserve Bank on more than one occasion by the applicant, Reserve Bank would take suitable action against the defaulting borrowers.