What changed
The maximum permissible buyback of FCCBs out of internal accruals was raised from USD 50 million to USD 100 million per company. Higher buyback amounts now require larger minimum discounts: 25% for up to USD 50 Mn, 35% for USD 50-75 Mn, and 50% for USD 75-100 Mn of redemption value.
What it means for you
Indian companies can now retire more FCCB debt at a discount, reducing foreign currency liabilities and improving balance sheets. Banks facilitating these buybacks must ensure clients meet the tiered discount thresholds and complete the process by December 31, 2009.
What you must do
- Advise corporate clients on the revised FCCB buyback limits and tiered discount requirements.
- Verify that buyback proposals submitted to RBI include proof of internal accruals and applicable discount.
- Ensure all buyback transactions are completed by December 31, 2009, as per earlier circular.
- Maintain records of approvals and discounts applied for each buyback.
Who it affects
AD Category-I banks, Indian companies with outstanding FCCBs, Corporate treasuries managing foreign currency debt
What is the maximum FCCB buyback amount now allowed?
Indian companies can buy back up to USD 100 million of redemption value per company using internal accruals, subject to RBI approval and tiered discounts.
What discounts apply for different buyback amounts?
Minimum discount of 25% for up to USD 50 Mn, 35% for USD 50-75 Mn, and 50% for USD 75-100 Mn of redemption value.
Is RBI approval still required for these buybacks?
Yes, all buybacks under this circular require prior RBI approval under the approval route.