This will enable foreign investors to repatriate their income. Government officials said while the relaxation was being considered for only the next two months, the window might be extended beyond September 30.
At over $80 billion, the position of foreign exchange reserves in the country is extremely comfortable. The relaxation will be similar to the one extended to companies for prepayment of External Commercial Borrowings and Foreign Currency Convertible Bonds without any limit from March 1, 2003, till September 30.
Companies in the telecom sector, like BPL Communications which had issued preference shares to foreign investors, can benefit from the move. The department of telecom had in the past permitted Tata Teleservices to issue redeemable preference shares to the US-based Hughes Communications in lieu of its stake in Hughes Tele.com.
Under the existing guidelines, investments in redeemable preference shares have to be for five years. But there have been demands from several companies to allow prepayment. The issue has been taken up by the Foreign Investment Promotion Board which, however, deferred a decision, pending a policy clearance from the finance ministry.
Although the finance ministry has periodically relaxed the norms for redemption of redeemable preference shares, it has always adopted a cautious approach because repatriation of the funds puts a strain on forex reserves.
The early redemption of such shares increased the country
