Saturday, April 23, 2016

Issuance of Rupee denominated bonds overseas

Issue of Rupee denominated bonds overseas will be within the aggregate limit of foreign investment in corporate debt, which is capped at Rs.2443.23 billion as per the monetary policy.

The maximum amount which can be borrowed by an entity in a financial year under the automatic route by issue of these bonds will be Rs. 50 billion. Proposals to borrow beyond this limit will require prior approval of the RBI.

The Rupee denominated bonds can only be issued by the resident of a country:

     that is a member of FATF or a member of a FATF- Style Regional Body;
       whose securities market regulator is a signatory to the International Organization of Securities Commission's (IOSCO’s) Multilateral Memorandum of Understanding or a signatory to bilateral Memorandum of Understanding with the SEBI for information sharing arrangements; and
      should not be a country identified in the public statement of the FATF as:

(i)             A jurisdiction having a strategic AML or CFT deficiencies; or
(ii)           A jurisdiction that has not made sufficient progress in addressing the deficiencies.

The minimum maturity period for Rupee denominated bonds issued overseas will be three years.

Borrowers issuing Rupee denominated bonds overseas should incorporate a clause in the offer document so as to obtain the list of primary bond holders for providing it to the regulatory authorities in India. The offer document should also state that the bonds can only be sold / transferred / offered as security overseas, subject to IOSCO / FATF requirements.

In order to capture inflows/ outflows on account of the issue of these bonds, banks should report to RBI, the actual drawdown(s) / repayment(s) by their constituent borrowers.
Based on RBI notification dated 13/4/2016. For further clarification, please refer ………………Poppy Sharma