RBI rules for foreign currency bonds soon

Tuesday, 27 May 2008, 13:24 Hrs
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Mumbai: Giving more options to companies to raise money abroad, the Reserve Bank of India is likely to set rules for foreign currency exchangeable bonds (FCEBs) within one month.

"The government and RBI have been discussing this matter for the past few weeks and the guidelines can be expected soon," said an official, requesting anonymity.?RBI FCEBs are similar to foreign currency convertible bonds (FCCBs) that allow firms to raise money by issuing bonds. However, unlike FCCBs, where the bonds can be converted into equity shares of the issuing company, FCEBs can be converted into shares of a group company of the issuer.

According to the scheme notified by the government in February this year, any Indian company not eligible to raise funds from the domestic market, will not be eligible to issue FCEBs. The rate of interest payable on FCEBs and the expenses in foreign currency of the bond issue will be the same as the cost ceiling RBI specifies for external commercial borrowing (ECBs).

While funds raised through FCEBs cannot be invested in capital markets and real estate in India, companies will be able to use the money for overseas operations. All categories of investors can subscribe to FCEBs.
Source: IANS
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