Regulation 6(3) of the Foreign Exchange Management (Deposit) Regulations, 2016 ('Deposit Regulations') permitted an Indian company to issue commercial papers ('CPs') to a non-resident Indian or a person of Indian origin or a foreign portfolio investor registered with the Securities and Exchange Board of India ('SEBI'), subject to the conditions specified therein. With a view to bring in consistency in statutory provisions/ regulations relating to CPs such as: (i) Section 45U(b) of the Reserve Bank of India Act, 1934 (which describes CPs as one of the money market instruments); and (ii) Section 2(c) of the Companies (Acceptance of Deposits), Rules 2014 (which excludes any amount received against issue of CPs from the definition of deposits), the Government of India by way of its notification dated July 16, 2019 has deleted Regulation 6(3) of the Deposit Regulations.
Accordingly, Indian companies are no longer permitted to accept deposits against issuance of CPs to a non-resident Indian or a person of Indian origin or a foreign portfolio investor registered with SEBI within the purview of the Deposit Regulations.
Published In:Inter Alia - Quarterly Edition - September 2019 [ English
Date: September 30, 2019
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