Restrictions on Credit to Companies for Buy-back of their Securities
In terms of Section 68 of the Companies Act, 2013, companies are permitted to purchase their own shares or other specified securities out of their:
Free reserves, or
Securities premium account, or
Proceeds of any shares or other specified securities, subject to compliance of various conditions specified in sub-section (2) of section 68 of Companies Act, 2013. Therefore, banks should not provide loans to companies for buy-back of shares/securities.