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RBI/2015-16/193
A.P. (DIR Series) Circular No.17
September 29, 2015
To,
All Authorised Dealer Category – I Banks
Madam/ Sir
External Commercial
Borrowings (ECB) Policy - Issuance of Rupee denominated bonds overseas
2. In order to facilitate Rupee denominated borrowing
from overseas, it has been decided to put in place a framework for issuance
of Rupee denominated bonds overseas within the overarching ECB policy. The
broad contours of the framework are as follows:
i.
Eligible borrowers: Any
corporate or body corporate as well as Real Estate Investment Trusts
(REITs) and Infrastructure Investment Trusts (InvITs).
ii.
Recognised investors: Any
investor from a Financial Action Task Force (FATF) compliant jurisdiction.
iii.
Maturity: Minimum maturity
period of 5 years.
iv.
All-in-cost: All in cost should
be commensurate with prevailing market conditions.
v.
Amount: As per extant ECB
policy.
vi.
End-uses: No end-use
restrictions except for a negative list.
3. The detailed guidelines for issuance of Rupee
denominated bonds overseas are set out in the Annex.
4. All other provisions of extant ECB guidelines
regarding reporting requirements (including obtaining Loan Registration
Number (LRN) through submission of Form 83 where type of ECB is to be
specifically mentioned as borrowing through issuance of Rupee denominated
bonds overseas), parking of bond proceeds, security / guarantee for the
borrowings, conversion into equity, corporates under investigation, etc.,
not appearing in the Annex will be applicable for borrowing by issuance of
Rupee denominated bonds overseas.
5. AD Category-I banks may bring the contents of this
circular to the notice of their constituents and customers.
6. The directions contained in this circular have
been issued under Section 10(4) and 11(1) of the Foreign Exchange
Management Act, 1999 (42 of 1999) and are without prejudice to permissions
/ approvals, if any, required under any other law.
Yours faithfully
(B. P. Kanungo)
Principal Chief General Manager
Annex
Issuance of Rupee
denominated bonds overseas
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Sr. No.
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ECB parameter
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Framework
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1.
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Eligibility of borrowers
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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.
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2.
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Type of instrument
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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.
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3.
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Recognised investors
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Any investor from a FATF compliant jurisdiction.
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 per cent of the issue size after 6 months of issue. Further,
such holding shall be subject to applicable prudential norms.
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4.
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Maturity
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Minimum maturity period of 5 years. The call and
put option, if any, shall not be exercisable prior to completion of
minimum maturity.
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5.
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All-in-cost
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The all-in-cost of such borrowings should be
commensurate with prevailing market conditions. This will be subject to
review based on the experience gained.
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6.
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End-uses
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The proceeds can be used for all purposes except
for the following:
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 (FDI) guidelines;
iv.
On-lending to other
entities for any of the above objectives; and
v.
Purchase of land.
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7.
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Amount
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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.
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8.
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Conversion rate
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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.
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9.
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Hedging
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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.
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10.
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Leverage
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The leverage ratio for the borrowing by financial
institutions will be as per the prudential norms, if any, prescribed by
the sectoral regulator concerned.
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