RBI/2011-12/105
A.P. (DIR Series) Circular No.01
(Last Circular of 2010-11 is 75)
July 04, 2011
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Redemption of Foreign Currency Convertible Bonds (FCCBs)
Attention of the Authorised Dealer Category - I (AD Category - I) banks is
invited to
A. P. (DIR Series) Circular No.5 dated August 1, 2005, as amended
from time to time, relating to instructions / guidelines in respect of External
Commercial Borrowings (ECBs), which are also applicable, mutatis mutandis, to
FCCBs.
- Keeping in view the need to provide a window to facilitate refinancing of FCCBs by the Indian companies who may be facing difficulty in meeting the
redemption obligations, it has been decided to consider applications for
refinancing of FCCBs by Indian companies under the automatic route. Accordingly,
designated AD Category - I banks may allow Indian companies to refinance the
outstanding FCCBs subject to compliance with the terms and conditions set out
hereunder: -
- Fresh ECBs/ FCCBs shall be raised with the stipulated average maturity period
and applicable all-in-cost being as per the extant ECB guidelines;
- The amount of fresh ECB/FCCB shall not exceed the outstanding redemption value
at maturity of the outstanding FCCBs;
- The fresh ECB/FCCB shall not be raised six months prior to the maturity date of
the outstanding FCCBs ;
- The purpose of ECB/FCCB shall be clearly mentioned as ‘Redemption of outstanding
FCCBs’ in Form 83 at the time of obtaining Loan Registration Number from the
Reserve Bank;
- The designated AD - Category I bank should monitor the end-use of funds;
- All other aspects of ECB policy under the automatic route, such as, eligible
borrower, recognised lender, end-use, prepayment, refinancing of existing ECB
and reporting arrangements shall remain unchanged;
- ECB / FCCB beyond USD 500 million for the purpose of redemption of the existing
FCCB will be considered under the approval route; and
- ECB / FCCB availed of for the purpose of refinancing the existing outstanding
FCCB will be reckoned as part of the limit of USD 500 million available under
the automatic route as per the extant norms.
- Restructuring of FCCBs involving change in the existing conversion price is
not permissible. Proposals for restructuring of FCCBs not involving change in
conversion price will, however, be considered under the approval route depending
on the merits of the proposal.
- The policy will be subject to review at an appropriate time depending upon
evolving macroeconomic conditions and other relevant factors.
- This facility shall come into force with immediate effect.
- 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 are
without prejudice to permissions / approvals, if any, required under any other
law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager