In order to facilitate Rupee denominated borrowing from
overseas, the Reserve Bank of India (RBI) has issued a framework
for issuance of Rupee denominated bonds overseas within the
comprehensive External Commercial Borrowing Policy (ECB) via
notification dated September 29, 2015.
The detailed guidelines for
issuance of Rupee denominated bonds overseas are set out below:
1. Eligibility of Borrowers:
Any corporate or body corporate is eligible to issue Rupee
denominated bonds overseas. Real Estate Investment Trusts (REITs)
and Infrastructure Investment Trusts (InvITs) coming under the
regulatory jurisdiction of the Securities and Exchange Board of
India are also eligible.
2. Type of Instrument
Only plain vanilla bonds issued in a Financial Action Task Force
(FATF) compliant financial centres; either placed privately or
listed on exchanges as per host country regulations.
3. Recognized Investors
Any investor from a FATF compliant jurisdiction is eligible.
Banks incorporated in India will not have access to these bonds in
any manner whatsoever. Indian banks, however, can act as arranger
and underwriter. In case of underwriting, holding of Indian banks
cannot be more than 5% of the issue size after 6 months of issue.
Further, such holding shall be subject to applicable prudential
Minimum maturity period of such bonds shall be 5 years. The call
and put option, if any, shall not be exercisable prior to
completion of minimum maturity.
The all-in-cost of such borrowings should be commensurate with
prevailing market conditions. This will be subject to review by the
6. End uses
The proceeds can be used for all purposes except a negative list
viz. as follows:
i. Real estate activities other than for development of
integrated township / affordable housing projects;
ii. Investing in capital market and using the proceeds for
equity investment domestically;
iii. Activities prohibited as per the foreign direct investment
iv. On-lending to other entities for any of the above
v. Purchase of land.
Under the automatic route the amount will be equivalent of USD
750 million per annum. Cases beyond this limit will require prior
approval of the Reserve Bank.
8. Conversion rate
The foreign currency - Rupee conversion will be at the market
rate on the date of settlement for the purpose of transactions
undertaken for issue and servicing of the bonds.
The overseas investors will be eligible to hedge their exposure
in Rupee through permitted derivative products with AD Category - I
banks in India. The investors can also access the domestic market
through branches / subsidiaries of Indian banks abroad or branches
of foreign bank with Indian presence on a back to back basis.
The leverage ratio for the borrowing by financial institutions
will be as per the prudential norms, if any, prescribed by the
Regulator of the concerned sector.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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