What changed
The time limit for premature buyback of FCCBs has been extended, and the procedure has been liberalised. Under the automatic route, the minimum discount on book value is set at 8%, and funds can come from existing foreign currency holdings or fresh ECB. Under the approval route, companies can buyback up to USD 100 million per company with tiered minimum discounts of 10%, 15%, and 20% based on redemption value slabs.
What it means for you
Indian companies now have a clearer, more flexible framework to manage FCCB liabilities, reducing refinancing risk. Banks acting as AD Category-I must ensure compliance with discount thresholds and fund sourcing rules, and guide clients through the application process. The extended timeline gives firms until March 31, 2012, to complete buybacks.
What you must do
- Verify that FCCB buyback applications under automatic route meet the 8% minimum discount on book value and use eligible funds (existing foreign currency or fresh ECB).
- For approval route cases, ensure applications are submitted with supporting documents through your bank to RBI's ECB Division, with correct discount slabs for amounts up to USD 100 million.
- Communicate the updated policy and deadlines to corporate clients holding FCCBs, and advise them on compliance with all terms from earlier circulars.
Who it affects
AD Category-I banks, Indian companies with outstanding FCCBs, Corporate treasuries managing foreign currency liabilities
What is the minimum discount required for FCCB buyback under the automatic route?
Under the automatic route, the buyback must be at a minimum discount of 8% on the book value of the FCCB.
Can a company buyback FCCBs worth more than USD 100 million under the approval route?
No, the approval route permits buyback up to USD 100 million of redemption value per company. Amounts above that are not covered by this circular.
What is the deadline for completing the FCCB buyback process?
The entire buyback process must be completed by March 31, 2012, as per the circular.