After tightening the norms for external commercial borrowings by corporates, the finance ministry will do the same for foreign currency convertible bonds.

The interest rate ceiling on foreign currency convertible bonds is likely to be pegged 100 basis points below the new permissible spread on external commercial borrowing rates.

The interest rates on external commercial borrowings have been slashed to 150-300 points above the six-month London Inter-Bank Offered Rate, from 300-450 points earlier. The end-use norms are also expected to be tightened to cover only infrastructure projects.

The ministry has sought details of the net outstanding position of foreign currency convertible bonds from the Reserve Bank of India.

Finance ministry officials said the review would also be guided by the extent of foreign currency convertible bonds raised by domestic companies, and the impact on foreign exchange reserves if they were allowed to continue.

Usually, the central bank provides data on foreign currency convertible bond flows under the automatic route, which accounts for the bulk of such debt flow at the end of each fiscal.

The scheme for issue of foreign currency convertible bonds and ordinary shares was notified by the government in 1993 to allow companies easier access to foreign capital markets.