What changed
The buyback scheme for FCCBs, previously covered under circulars from December 2008 and June 2011, has been continued with modifications. The key change is that buyback must now be at a minimum discount of 5% on the accreted value, and the entire process must be completed by March 31, 2013, after which the scheme lapses.
What it means for you
Indian companies can now buy back their FCCBs at a discount, reducing foreign currency liabilities and improving balance sheets. Banks acting as AD Category-I must ensure compliance with FEMA rules for any foreign currency borrowing used for buybacks and submit detailed reports to RBI. This provides a structured exit for FCCB holders while offering cost savings to issuers.
What you must do
- Advise corporate clients on the buyback scheme's terms, including the mandatory 5% discount on accreted value.
- Ensure any foreign currency borrowing for buyback complies with all FEMA regulations.
- Submit ECB-2 returns and a detailed buyback report (outstanding amount, accreted value, rate, amount, funding source) to RBI via the designated AD Category-I bank.
- Complete all buyback processes by March 31, 2013, as the scheme lapses thereafter.
Who it affects
Indian companies with outstanding FCCBs, AD Category-I banks handling FCCB transactions, FCCB investors and holders
What is the minimum discount required for FCCB buyback?
The buyback must be at a minimum discount of 5% on the accreted value of the FCCBs.
What reporting is required after completing the buyback?
Banks must submit ECB-2 returns and a detailed report to RBI including outstanding amount, accreted value, buyback rate, amount involved, and source of funds.
Is there a deadline for completing the buyback?
Yes, the entire buyback process must be completed by March 31, 2013, after which the scheme lapses.