The Reserve Bank of India (RBI) today raised the annual limit of Foreign Currency Convertible Bonds (FCCBs) for companies to $750 million under the automatic route, which does not require prior permission from it.
The limit, up from $500 million in a fiscal year, will not only help Indian corporate across all segments access higher quantum of overseas funds but also encourage greater inflow of foreign exchange.
"...Eligible borrowers under the automatic route can raise FCCBs up to $750 million or equivalent per financial year for permissible end-uses," the Reserve Bank said in a circular.
Corporates in specified service sectors like hotels, hospitals and software, can raise FCCBs up to $200 million subject to the condition that the proceeds would not be used for acquisition of land.
RBI's decision comes a few months after the government decided to relax norms on External Commercial Borrowings (ECBs). In September, the limit of ECBs with tenure of 5 years or more under the automatic route was increased from $500 million to $750 million.
For the services sector, the ECB limit under automatic route was doubled to $200 million and for NGOs from $5 million to $10 million.
This was done following suggestions made by top industry leaders at a meeting with Finance Minister Pranab Mukherjee to boost the economy.
The RBI circular further said, "...It is clarified that the ECB/FCCB availed of for the purpose of refinancing the existing outstanding FCCB will be reckoned as part of the limit of $750 million available under the automatic route as per the extant norms."
It also said henceforth ECBs of up to $20 million or equivalent in a financial year will have a minimum average maturity of three years, while for ECBs of $20-750 million the average maturity would be of five years.
"Accordingly, the requirement of average maturity period, prepayment and call/put options... [for additional amount of $250 million] has been dispensed with," the circular said.
