RPL will save interest cost of about 300-400 basis points per annum on Rs 500 crore, aggregating to more than Rs 125 crore over the life of the loan. IFCI's loans had a final maturity of over nine years and an average residual maturity of about six years.

The move is part of Reliance group's ongoing exercise to replace its high interest debt with low interest borrowings in the current soft interest rate environment besides optimising interest costs and enhancing global competitiveness, sources said. Reliance Industries had recently prepaid its oil and gas securitisation dues to financial institutions and banks to the tune of Rs 1,200 crore.

It also prepaid the outstanding H-series debentures of over Rs 350 crore.With the Rs 500 crore prepayment, RPL has cleared the entire borrowings fromIFCI.

"The prepayment by RPL is in-keeping with the pioneering tradition set by RIL which has utilised every window of opportunity to drive down interest costs and reduce its weighted average cost of capital," a Reliance group official said.

IFCI's exposure in Reliance group has come down to less than Rs 100 crore, representating barely 8 per cent of the financial institution's networth. The prepayment will enhance IFCI's lendable resources by Rs 500 crore.

Sources said that the prepayment by RPL about six years in advance of the due date even as the refinery project is still in the commissioning phase indicates the financial strength of the company.

RPL is setting up the 27 million tonnes per annum (540,000 barrels a day) at a capital outlay of Rs 14,250 crore. The refinery was originally planned for 18 million tonnes per annum but later stepped to 27 mtpa to reduce the capital cost per tonne from over Rs 6200 to Rs 5278 per tonne.

The start up of the refinery commenced last month, which was nearlysix months ahead of the schedule. Delivery of products from the refinery to the oil public sector undertakings has also begun.

The refinery is likely to be fully commissioned during the second half of the current financial year. The refinery's capacity will account for nearly 25 per cent of the country's refining capacity.