FCCB (‘Foreign Currency Convertible Bonds’), a quasi debt instrument in nature issued in a currency different than the issuer’s domestic currency with an option to convert them in common shares of the issuer company, has proved to be a win-win deal for the both – the investors and the issuers and thus being an all time attractive option for both – the investors and the issuers for the purpose of raising foreign currency funds at attractive rate. The investors / bondholders receive the safety of guaranteed payments on the bond (if interest payment is involved) and are also able to take advantage of any price appreciation in the company’s stock, the issuer is able to reduce its debt – financing costs due to the equity side of the bond, the coupon payments on the bond are lower, thereby for the issuer.

• Indian companies have been permitted to raise fresh External Commercial Borrowing (ECB)/FCCB as per the extant ECB guidelines under the automatic route to refinance their outstanding FCCBs. However, restructuring of FCCBs involving change in the existing conversion price are not held to be permissible. Also that the 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.
• ECB borrowers have been permitted to change the recognized lender, subject to however, the ensuring certain conditions such as the new lender is a recognized lender as per the extant ECB norms; there is no change in the other terms and conditions of the ECB; and the ECB is in compliance with the extant guidelines.
• Indian companies in the infrastructure sector, have been permitted to utilise 25 per cent of the fresh ECB raised by the corporate towards refinancing of the Rupee loan/s availed by them from the domestic banking system, under the approval route, subject to certain conditions as stipulated by RBI.
• Indian companies in the infrastructure sector have been allowed, to import capital goods by availing of short term credit (including buyers’ / suppliers’ credit) in the nature of 'bridge finance', under the approval route, subject to certain conditions as stipulated by RBI.
• ECB borrowing limit for eligible borrowers in real sector-industrial sector-infrastructure sector has been enhanced from USD 500 million to USD 750 million or equivalent per financial year under the automatic route.
• Corporates in specified service sectors viz. hotel, hospital and software, can avail of ECB up to USD 200 million or equivalent during a financial year as against the present limit of USD 100 million or equivalent per financial year subject to the condition that the proceeds of the ECBs should not be used for acquisition of land.
• All eligible borrowers have been permitted to avail of ECBs designated in INR from foreign equity holders under the automatic/ approval route, as the case may be.
• Direct foreign equity holders, holding minimum of 25 per cent of the paid up capital and indirect foreign equity holders, holding atleast 51% of the paid-up capital, have been permitted under the automatic route to provide credit enhancement to Indian companies engaged exclusively in the development of infrastructure, on ECB and by the Infrastructure Finance Companies (IFCs) been classified as such by the Reserve Bank.
• The term 'debt' in the debt-equity ratio will be replaced with 'ECB liability' and the ratio will be known as 'ECB liability'-equity ratio to make the term signify true position as other borrowings/debt are not considered in working out this ratio.