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ECB vs FCCB


This is in response to the queries I received on whether ECB or FCCB is more convenient/liberal/less regulated.

For guidelines on each of them, please refer to the links attached in the respective articles.

FCCB

http://www.icai.org/icairoot/publications/complimentary/cajournal_nov05/703-708.pdf.

ECB

http://www.icai.org/icairoot/publications/complimentary/cajournal_may04/p1216-19.pdf

As regards which is more convenient, it always depends on the company raising funds.

Historically, companies prefer ECBs over FCCBs. The RBI data for the month of December 2007 showed only 7 of 44 companies raising funds through FCCBs automatic route and all 7 companies preferring the ECB over FCCB through approval route.

http://rbidocs.rbi.org.in/rdocs/ECB/pdfs/83662.pdf

Government has said that it is contemplating relaxing norms governing external commercial borrowings (ECBs) to enable Indian corporates access higher foreign capital at low cost. Besides, a review is underway to remove restrictions on foreign currency convertible bonds (FCCBs). The Govt is planning (though since quite a long time now) to amend FEMA and make the necessary changes in the guidelines so as to enable the Indian corporates raise substantial borrowings from overseas.

However, it has been made clear that the government would not allow unrestricted interest rate regime in ECBs in view of East Asian meltdown, caused by high interest rates and short duration of such borrowings in late ‘90s as Cost of borrowing is a concern for the Govt.

I hope at least this answers our initial questions. Please read through the links above while I prepare to answer more elaborately with updated information.

after all its all about ~ improving perfection ~

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