RBI/2011-12/271
A.P. (DIR Series) Circular No. 49
November 22, 2011
To,
All Category – I Authorised Dealer banks
Madam / Sir,
Foreign Investments in Infrastructure Debt Funds
Attention of Authorised Dealers Category – I (AD Category - I) banks is invited
to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security
by a Person Resident outside India) Regulations, 2000 notified vide
Notification
No. FEMA 20 / 2000 -RB dated May 3, 2000, as amended from time to time. In terms
of this notification, a SEBI registered Foreign Institutional Investor (FII) and
a Non-Resident Indian (NRI) may invest in securities other than shares or
convertible debentures, subject to such terms and conditions mentioned therein
and limits as prescribed for the same by the Reserve Bank and the Securities and
Exchange Board of India (SEBI) from time to time.
Attention of Authorised Dealers Category – I (AD Category - I) banks is also
invited to
AP (DIR Series) Circular No.8 dated August 9, 2011 and
AP (DIR
Series) Circular No.42 dated November 3, 2011 in terms of which Qualified
Foreign Investors (QFIs as defined therein to mean non-resident investors, other
than SEBI registered FIIs and SEBI registered FVCIs, who meet the KYC
requirements of SEBI) are allowed to invest in units of domestic Mutual Funds.
- It has now been decided to allow investment on repatriation basis by eligible
non-resident investors (as mentioned in para 3 below) in (i) Rupee and Foreign
currency denominated bonds issued by the Infrastructure Debt Funds (IDFs) set up
as an Indian company and registered as Non-Banking Financial Companies (NBFCs)
with the Reserve Bank of India and in (ii) Rupee denominated units issued by
IDFs set up as SEBI registered domestic Mutual Funds(MFs), in accordance with
the terms and conditions stipulated by the SEBI and the Reserve Bank of India
from time to time.
These investments would be subject to the following terms and conditions.
- Eligible non- resident investors
- Sovereign Wealth Funds, Multilateral Agencies, Pension Funds, Insurance Funds
and Endowment Funds which are registered with SEBI as eligible non- resident
investors in IDFs (hereinafter referred to as ‘SEBI registered eligible non-
resident investors in IDFs’).
- SEBI registered Foreign Institutional Investors (FIIs).
- Non Resident Indians (NRIs) as defined in the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India) Regulations,
2000 (Notification No. FEMA 20/2000-RB dated May 3, 2000), as amended from time
to time.
- High Networth Individuals (HNIs) registered with SEBI as sub accounts of SEBI
registered FIIs or HNIs which are separately registered with SEBI as eligible
non-resident investors in IDFs in India.
- Eligible Instruments / Securities for non-resident investment in IDFs
| |
Eligible non-resident investor |
Eligible instruments |
| (i) |
SEBI registered eligible non- resident investors in
IDFs (as per 3 (a) above) |
Foreign Currency and Rupee denominated bonds and
rupee denominated units issued
by IDFs |
| (ii) |
SEBI registered FIIs who qualify as (i) above
|
Foreign Currency and Rupee denominated bonds and
rupee denominated units issued
by IDFs |
| (iii) |
SEBI registered FIIs who do not qualify as (i) above
|
Rupee denominated bonds and units issued by IDFs |
| (iv) |
NRIs |
Rupee denominated bonds and units issued by IDFs |
| (v) |
HNIs (as per 3(d)) |
Foreign Currency and Rupee denominated bonds and
rupee denominated units issued
by IDFs |
- Original / Initial Maturity
The original / initial maturity of all aforementioned securities at the time of
first investment by a non resident investor shall be five years.
- Lock in period
All non-resident investment in the aforementioned securities would be subject to
a lock in period of three years. However, all non-resident investors can trade
amongst themselves within this lock in period of three years.
- Foreign Currency Denominated bonds
Foreign currency denominated bonds issued by IDFs would have to comply with all
the terms and conditions (including all in cost) under the extant FEMA
guidelines / regulations for External Commercial Borrowing (ECB), other than
reporting requirements.
- Quantitative limits for non- resident investment in IDFs:
- All non-resident investment in IDFs (other than NRIs) (in both Rupee and Foreign
Currency denominated securities) would be within an overall cap / limit of USD
10 billion only. This cap / limit of USD 10 billion would be within the overall
cap of USD 25 billion for FII investment in bonds / non convertible debentures
issued by Indian companies in the infrastructure sector (where infrastructure is
as defined under the extant ECB guidelines) or by Infrastructure Finance
Companies (IFCs registered as NBFCs with the Reserve Bank).
- There would be no cap / limit for NRI investment in IDFs by way of Rupee
denominated bonds / units.
- Other conditions
- End use
- IDFs set up as NBFCs may invest in debt securities of only Public Private
Partnership (PPP) infrastructure projects which have a buyout guarantee and have
completed at least one year of commercial operations. Refinance by IDF would be
up to 85% of the total debt covered by the concession agreement.
- IDFs set up as MFs would invest minimum of 90% of its funds in debt securities
of infrastructure companies or SPVs across all infrastructure sectors, project
stages and project types.
(where ‘infrastructure’ is defined in terms of the extant ECB guidelines)
- Foreign exchange hedging
The facility of foreign exchange hedging would be available to the eligible
non-resident IDF investors, IDFs as well as the infrastructure project companies
exposed to the foreign exchange/ currency risk as per the extant provisions
under Notification No. FEMA.25/2000-RB dated May 3, 2000, as amended from time
to time.
- AD Category - I banks may bring the contents of the circular to the notice
of their customers/constituents concerned.
- Necessary amendments to Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident outside India) Regulations, 2000 (Notification No.
FEMA. 20/2000-RB dated May 3, 2000) are being notified separately.
- The directions contained in this circular have been issued under Sections
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,
(Meena Hemchandra)
Chief General Manager-in-Charge