Although industry experts point that since few bonds are maturing in the next 12 months, hence there is a little use for this exception. “Also, bondholders are unlikely to sell at a discount closer to maturity. The equity market has also revived from its lows of 2009," pointed out an analyst with a domestic brokerage.

The central bank's decision came considering that many bonds are trading at deep discounts with respect to their issue price. So, it will be a relief to companies whose bonds had reached maturity dates but the companies were unable to buyback due to funding issues.

A FCCB is primarily a convertible bond where the bondholder will have the right of choice. The bond holder can either accept the money due on maturity (which is interest plus principal) or can convert the bond to equity at a pre-agreed conversion price.

So when a company's FCCB approaches maturity and the share-price trading on the stock exchange is less than that of conversion price, then it brings pressure on the companies to for buy back of the FCCB.

The other way around it is to bring down the conversion price. But implementing this will also result in the larger equity dilution.

RBI in its financial stability report had aired concern over the ability of companies to implement a buy back considering large number of maturities over the next two years.

According to guidelines set by the RBI, the companies should be able to prepay or buyback the bonds under the 'automatic" route in addition to the approval route. Under the automatic route, companies are allowed to buy bonds prematurely at a minimum discount of 8% to the book value.

But this may not be of much help to companies, especially where companies would like to repurchase bonds that are offered at discounts of more than the 8%, that is suggested by the RBI. But these companies are unable to do so since the RBI does not permit such transactions.

According to media reports, more than 200 companies had raised through the FCCB route during 2006-2008, which was the peak of the investment cycle. The raised amount was approximately Rs 72,000 crore.

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