Mumbai, Dec. 6: The Reserve Bank of Indias decision to allow premature buyback of foreign currency convertible bonds (FCCBs) is likely to have little impact on cash-strapped India Inc.
The central bank said banks could consider application for premature buybacks provided the sources of funds are from foreign currency resources held in India.
The RBI will also consider applications for premature buyback of FCCBs out of rupee resources of firms if there is a minimum discount of 25 per cent on the FCCBs.
There are two other riders: the amount of the buyback must be limited to $50 billion of the redemption value per company and these rupee resources should come out of internal resources.
This essentially means only cash-rich companies and those with a substantial portion of unutilised FCCBs will be able to get this relaxation.
It is attractive only if a company has cash or unutilised FCCBs, said Kotak Mahindra Bank executive director Dipak Gupta.
Others feel that the principle is sound but few companies would actually come forward to buyback their FCCBs.