BANKING AFFAIRS

Detailed explanation-1: -Foreign Currency Convertible Bonds (FCCBs) mean a bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which is payable in foreign currency.

Detailed explanation-2: -Since these bonds are convertible into equity shares over a period of time as provided in the instrument, therefore they are covered under FDI policy & counted towards FDI.

Detailed explanation-3: -Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specified period. thus a holder of FCCB has the option of either converting it into equity share at a predetermined price or exchange rate, or retaining the bonds.

Detailed explanation-4: -Benefits of FCCBs The coupon rates on FCCB’s are generally lower than traditional bank interest rates, reducing the cost of debt financing. If converted, the company is able to reduce its debt as a result of foreign currency convertible bonds and thus gains additional, much-needed equity capital.

Detailed explanation-5: -Euro-convertible Bonds (ECBs) are bonds that are issued and sold outside the home country of the currency. Hence, an ECB issued by an Indian company refers to bonds issued in any country other than India.