Reserve Bank of India ("RBI") vide
its notification dated September 29, 2015 –
"External Commercial Borrowings (ECB) Policy –
Issuance of Rupee denominated bonds overseas",
("the Notification") eased the options
of raising debt from the external sectors, by permitting Indian
corporates to issue rupee denominated bonds ("Rupee
Bonds") to non-resident investors. This relaxation
granted by RBI helped Indian corporates mitigate the risk of
currency fluctuations. As per the Notification, the Rupee Bonds are
to be issued under the extant external commercial borrowing
("ECB") policy. RBI through its circular
"Issuance of Rupee denominated bonds
overseas" dated April 13, 2016, made an
effort to promote the Rupee Bonds by reducing the minimum maturity
period for Rupee Bonds issued overseas from five years to three
However, confusion prevailed amongst the Indian corporates,
concerning compliance with the provisions in respect of private
placement prescribed under the Companies Act, 2013
("Companies Act") and Companies (Share
Capital and Debenture) Rules, 2014 ("Debenture
Rules") at the time of issue of such Rupee Bonds.
Clarification by Ministry of Corporate Affairs
MCA had earlier clarified that the provisions in respect of
private placement under the Companies Act were not applicable to
foreign currency convertible bonds or foreign currency bonds issued
under the relevant RBI regulations, a circular on similar lines was
awaited for regulating specifically the issue of Rupee Bonds by
MCA has on August 3, 2016 issued a circular ("the
Circular"), providing clarifications concerning the
non-applicability of the relevant provisions of the Companies Act
on issue of Rupee Bonds to overseas investors by Indian companies.
As per the Circular, MCA has clarified that unless otherwise
provided in any circular/directions/regulations issued by RBI, the
provisions of Chapter III of the Companies Act (related to
Prospectus and Allotment of Securities) and Rule 18 of
Debenture Rules would not apply to issue of Rupee Bonds, made
exclusively to person resident outside India in accordance with the
applicable sectoral regulatory provisions. MCA is in the process of
appropriately amending the Debenture Rules, in this regard.
Circular by Securities Exchange Board of India
("SEBI") on Rupee Bonds
SEBI has also issued a circular on August 4, 2016
("SEBI Circular"), regarding foreign
investment in Rupee Bonds issued overseas by Indian corporates, for
clarifying that investment in Rupee Bonds, shall not be treated as
a Foreign Portfolio Investment and the SEBI (Foreign Portfolio
Investor) Regulations, 2014 shall not be applicable to such
investments. SEBI Circular has further clarified that the corporate
debt limit of INR 2443.23 billion shall be redefined as combined
corporate debt limit for foreign investment in Rupee Bonds issued
both onshore and overseas and the foreign investment shall be
reckoned against this combined corporate debt limit.
Further, SEBI has asked the depositories (NSDL and CDSL) in its
SEBI Circular to put in put in place the necessary systems for
receiving data on foreign investments in overseas Rupee Bonds from
RBI on a periodic basis.
RBI Notification has been well received by Indian corporates,
who have shown interest and enthusiasm in issuing Rupee Bonds. It
is estimated that Indian Corporates have already raised INR 50
billion by issuing Rupee Bonds. MCA and SEBI by issuing their
respective clarifications have simplified the compliances required
for issuance of Rupee Bonds thereby easing the process for issue of
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