To facilitate Rupee denominated borrowing from overseas, the RBI has incorporated a framework for the issuance of Rupee denominated bonds overseas, within the existing regulatory umbrella of the External Commercial Borrowings Policy ("ECB Policy") by issuing a circular, on September 29, 2015 ("ECB Circular"). Salient features of the ECB Circular are as follows:

1.Any corporate/body corporate, including a Real Estate Investment Trust ("REIT") and a Infrastructure Investment Trust ("IVTs") registered with the Securities and Exchange Board of India ("SEBI") will be eligible borrowers and can issue Rupee denominated bonds overseas

2.The instrument will be issued in plain vanilla bonds issued in Financial Action Task Force ("FATF") compliant centers. They may be privately placed or listed as per host country regulations. Recognized investors are to be from FATF compliant jurisdictions. The participation of banks incorporated in India shall only be in the form of arranger and underwriters, subject to holding limits and prudential norms. Indian banks cannot hold more than 5% (five percent) of the issue size after 6 (six) months of the issue

3. Call and put option may be exercised only after the expiry of a minimum maturity period of 5 (five) years. The all-in-cost of such borrowings should correspond to prevailing market conditions

4. The proceeds may be used for all purposes, subject to a few exceptions, such as real estate activities, purchase of land, capital market investment, activities prohibited by the Foreign Direct Investment ("FDI") policy and on-lending to other entities for any of the above purpose

5.Under the automatic route, the amount up to a limit ofUS$ 750,000,000 (United States Dollars Seven hundred fifty million) can be raised, beyond which RBI approval will be required

6.For the purpose of transactions relating to the issue and servicing of such bonds, the foreign currency to Rupee conversion rate will be at the market rate on the date of settlement

7.The overseas investors will be eligible to hedgetheirexposureinRupee, through permitted derivative products with Indian banks.

This move is free of the risk attached to borrowings made in foreign currency, while also being a significant step in building a strong rupee bond market. There being very few negative restrictions, the large range of end-uses open to issuers, coupled with a new source of funding for their activities is likely to boost the investment climate in India.

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