The Reserve Bank of India (RBI) has further liberalised external commercial borrowing limits for Indian companies and also increased the total amount of permissible buyback of foreign currency convertible bonds (FCCBs), out of internal accruals, from $50 million of the redemption value per company to $100 million, under the approval route, with immediate effect.

The RBI has decided to dispense with the requirement of all-in-cost ceilings on ECB, under the approval route, until 30 June 2009. Accordingly, eligible borrowers, proposing to avail of ECBs beyond the prescribed all-in-cost ceilings, could approach the Reserve Bank, under the approval route, the central bank said in a release.

''As announced in the annual policy statement 2009-10 and considering the continuing pressure on credit spreads in the international markets, it has been decided to extend the relaxation in all–in-cost  ceilings, under the approval route,  until 31 December 2009,'' RBI said, adding, the policy will be reviewed in December 2009.

The modifications to the ECB guidelines shall come into force with immediate effect. All other aspects of ECB policy, such as $500 million limit per company per financial year under the automatic route, eligible borrower, recognised lender, end-use, average maturity period, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

RBI said it will make necessary amendments to the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, of 3 May 2000, which is being issued separately.

RBI said it has been considering proposals from Indian companies for buyback of FCCBs out of their internal accruals, under the approval route up to a total amount of $50 million of the redemption value per company, subject to a minimum discount of 25 per cent on the book value.

''Keeping in view the benefits accruing to the Indian companies, the current policy has been reviewed,'' RBI said.

The RBI also increased the total amount of permissible buyback of foreign currency convertible bonds (FCCBs), out of internal accruals, from $50 million of the redemption value per company to $100 million, under the approval route, with immediate effect.

''Accordingly, Indian companies may henceforth be permitted to buy back FCCBs up to $100 million of the redemption value per company, out of internal accruals, with the prior approval of the Reserve Bank,'' RBI said in its release.

RBI, however, has linked the higher amount of buyback or redemption to larger discounts.

The redemption is subject to: 
 
i) minimum discount of 25 per cent of book value for redemption value up to $50 million;

ii) minimum discount of 35 per cent of book value for the redemption value over $50 million and up to $75 million; and

iii) minimum discount of 50 per cent of book value for the redemption value of $75 million and up to $100 million.

All other terms and conditions stipulated in the earlier circular (No 39 dated 8 December 2008) will continue to be applicable and the entire procedure of buyback will have to be completed by 31 December 2009, RBI said.

Category -I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

The directions contained in this circular have been issued under sections 10(4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law, RBI said in its release.