RBI/2008-09/461
A. P. (DIR Series) Circular No 65
April 28, 2009
To,
All Category - I Authorised Dealer Banks
Madam / Sir,
Buyback / Prepayment of Foreign Currency Convertible Bonds (FCCBs)
Attention of Authorised Dealer Category - I (AD Category - I) banks is invited
to A.P.(DIR Series) Circular No. 39 dated December 8, 2008 and
A.P. (DIR Series)
Circular No. 58 dated March 13, 2009 on the captioned subject. In terms of Para
4 B of
A.P (DIR Series) Circular No. 39 dated December 8, 2008, Reserve Bank has
been considering proposals from Indian companies for buyback of FCCBs out of
their internal accruals, under the approval route up to a total amount of USD 50
million of the redemption value per company, subject to a minimum discount of 25
per cent on the book value.
- As announced in
Para 110 of the Annual Policy Statement 2009-10 and keeping
in view the benefits accruing to the Indian companies, the current policy has
been reviewed and it has been decided to increase the total amount of
permissible buyback of FCCBs, out of internal accruals, from USD 50 million of
the redemption value per company to USD 100 million, under the approval route by
linking the higher amount of buyback to larger discounts. Accordingly, Indian
companies may henceforth be permitted to buyback FCCBs up to USD 100 million of
the redemption value per company, out of internal accruals, with the prior
approval of the Reserve Bank, subject to a:
- minimum discount of 25 per cent of book value for redemption value up to USD
50 million;
- minimum discount of 35 per cent of book value for the redemption value over
USD 50 million and up to USD 75 million; and
- minimum discount of 50 per cent of book value for the redemption value of
USD 75 million and up to USD 100 million.
- All other terms and conditions stipulated in
A.P. (DIR Series) Circular No.
39 dated December 8, 2008 will continue to be applicable. This facility shall
come into force with immediate effect and the entire procedure of buyback should
be completed by December 31, 2009 as specified in
A.P. (DIR Series) Circular No.
58 dated March 13, 2009.
- AD Category - I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- The directions contained in this circular have been issued under sections
10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
is without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully
(Salim Gangadharan)
Chief General Manager –in - Charge