What changed
RBI permitted refinancing of outstanding FCCBs through fresh ECB/FCCB under the automatic route, provided the new borrowing does not exceed the redemption value and is raised no earlier than six months before maturity. Restructuring involving conversion price changes remains prohibited; other restructuring is considered case-by-case under approval route.
What it means for you
Banks can now facilitate FCCB refinancing for corporate clients under automatic route, easing redemption pressure. The USD 500 million cap per borrower under automatic route applies, with larger amounts requiring RBI approval. Banks must monitor end-use and ensure compliance with ECB guidelines.
What you must do
- Verify that fresh ECB/FCCB amount does not exceed outstanding redemption value of existing FCCBs.
- Ensure the new borrowing is raised at least six months before the maturity date of the outstanding FCCBs.
- Confirm that the purpose is clearly stated as 'Redemption of outstanding FCCBs' in Form 83 when applying for Loan Registration Number.
- Monitor end-use of funds and ensure compliance with all other ECB automatic route conditions.
- For amounts above USD 500 million, guide clients to apply under approval route.
Who it affects
AD Category-I banks, Indian companies with outstanding FCCBs, Corporate treasuries managing foreign currency liabilities
Can we refinance FCCBs with a fresh ECB that has a different currency?
The circular does not specify currency restrictions; it only requires compliance with extant ECB guidelines on eligible borrower, lender, and end-use. The fresh borrowing must be for redemption of outstanding FCCBs.
What if the FCCB is maturing in less than six months? Can we still refinance?
No. The circular explicitly states that fresh ECB/FCCB shall not be raised six months prior to the maturity date of the outstanding FCCBs. So refinancing is not allowed within that window.
Is restructuring of FCCBs allowed under this circular?
Restructuring involving a change in conversion price is not permissible. Other restructuring proposals (without conversion price change) will be considered under the approval route on a case-by-case basis.