Deadline for FCCB buyback, prepayment extended till Dec

Extends deadline for ECBs for 3G; Civil aviation

The Reserve Bank of India has extended the deadline for buyback and prepayment of foreign currency convertible debentures (FCCBs) under the approval route till December this year.

The decision to continue with the scheme was taken in the light of developments in the global financial markets and review of the scheme, RBI said in a communication to commercial banks.

RBI also decided to keep open the window for raising money via external commercial borrowing (ECB) for financing 3G telecom spectrum rupee loans till March 2014. This facility can be availed of only in cases where such rupee loans are dues in the operator’s book of accounts. At the time of spectrum allocation, successful bidders could initially make payment out of rupee resources. This could be later refinanced with long-term ECB under the approval route. RBI had said such ECB money could be raised within 12 months from the date of payment of the final instalment to the government.

RBI also decided to continue with the scheme for allowing companies in the civil aviation sector to raise money through ECB for working capital needs till December. According to RBI norms, using ECB for working capital is not a permissible end-use. However, in April 2012, it allowed this for the sector, under the approval route, subject to norms.

An airline registered under the Companies Act and possessing a scheduled operator permit licence for passenger transportation was so allowed. Airlines companies were permitted ECB based on the cash flow, foreign exchange earnings and capacity to service the debt.

The ECB can be raised with a minimum average maturity period of three years.The overall ECB ceiling for the entire civil aviation sector was $1 billion. The maximum amount an individual airline company could raise was capped at $300 million.

This limit can be used for working capital and for refinancing of the  working capital rupee loan dues from the domestic banking system. Airline companies seeking to use ECB for the latter had to give certificates from domestic lenders in this regard. Companies were barred from rolling over ECB taken for working capital/refinancing of working capital.

RBI discontinues ECBs in renminbi
RBI has also discontinued the facility for companies in infrastructure to raise ECBs in the Chinese currency, the renminbi, under the approval route. The annual cap for this window was $1 billion. RBI said it was observed that this facility had remained unused.

MORE ROOM

• The decision to continue with the scheme was taken in the light of developments in the global financial markets and review of the scheme
• RBI has also decided to keep open the window for raising money via external commercial borrowing for financing 3G telecom spectrum rupee loans till March 2014
• Scheme for allowing companies in the civil aviation sector to raise money through ECB for working capital needs can be continued till December