RBI/2015-16/372
A.P. (DIR Series) Circular No. 60
April 13, 2016
To
All Category-I Authorised Dealer Banks
Madam / Sir,
Issuance of Rupee denominated bonds overseas
Attention of Authorized Dealer Category - I (AD Category - I) banks is
invited to the provisions contained in
A.P. (DIR Series) circular No. 17 dated
September 29, 2015 on issuance of Rupee denominated bonds overseas and paragraph
no. 3.2, 3.3.1, 3.3.3 and 3.3.9 of Master Direction No.5 dated January 1, 2016
on External Commercial Borrowings, Trade Credit, Borrowing and Lending in
Foreign Currency by Authorised Dealers and Persons other than Authorised
Dealers. Attention of Authorized Dealer Category - I (AD Category - I) banks is
also invited to paragraph no. 30 and 31 of the Fourth Bi-Monthly Monetary Policy
Statement, 2015-16 issued on September 29, 2015, in terms of which:
The limits for Foreign Portfolio Investment (FPI) in debt securities is to be
announced / fixed in Rupee terms and;
The issuance of Rupee denominated bonds overseas will be within the aggregate
limit of foreign investment permitted in corporate debt as notified from time to
time.
- According to the Monetary Policy Statement, the current limit of USD
51 billion for foreign investment in corporate debt, as was given in
A.P.
(DIR Series) circular No. 94 dated April 01, 2013, has been fixed in Rupee
terms at Rs. 2443.23 billion. Issuance of Rupee denominated bonds overseas
will be within this aggregate limit of foreign investment in corporate debt.
- With fixing of aggregate limit of foreign investment in corporate debt in
Rupee terms, the provision at Sr. No. 7 of the table in the Annex to the
aforesaid circular dated September 29, 2015 regarding the amount of
borrowing by issuance of Rupee denominated bonds overseas has also been
modified. As the overall limit is now prescribed in Rupee terms, the maximum
amount which can be borrowed by an entity in a financial year under the
automatic route by issuance of these bonds will be Rs. 50 billion and not
USD 750 million as given in the circular. Proposals to borrow beyond Rs. 50
billion in a financial year will require prior approval of the Reserve Bank.
- Further, in order to have consistency regarding eligibility of foreign
investors in corporate debt, the criteria for investors and location for
issuance of these bonds has been modified. The Rupee denominated bonds can
only be issued in a country and can only be subscribed by a resident of a
country:
that is a member of Financial Action Task Force (FATF) or a member of a
FATF- Style Regional Body; and
whose securities market regulator is a signatory to the International
Organization of Securities Commission's (IOSCO’s) Multilateral Memorandum of
Understanding (Appendix A Signatories) or a signatory to bilateral
Memorandum of Understanding with the Securities and Exchange Board of India
(SEBI) for information sharing arrangements; and
should not be a country identified in the public statement of the FATF as:
(i) A jurisdiction having a strategic Anti-Money Laundering or Combating the
Financing of Terrorism deficiencies to which counter measures apply; or
(ii) A jurisdiction that has not made sufficient progress in addressing the
deficiencies or has not committed to an action plan developed with the
Financial Action Task Force to address the deficiencies.
- It has been decided to reduce the minimum maturity period for Rupee
denominated bonds issued overseas to three years in order to align with the
maturity prescription regarding foreign investment in corporate bonds
through the Foreign Portfolio Investment (FPI) route.
- Accordingly, the criteria mentioned at Sr. No. 3 and 4 of the table in
the Annex to the aforesaid circular dated September 29, 2015 for recognized
investors and maturity respectively, stands modified.
- Borrowers issuing Rupee denominated bonds overseas should incorporate
clause in the agreement / offer document so as to enable them to obtain the
list of primary bond holders and provide the same to the regulatory
authorities in India as and when required. The agreement / offer document
should also state that the bonds can only be sold / transferred / offered as
security overseas subject to compliance with aforesaid IOSCO / FATF
jurisdictional requirements.
- In order to capture inflows/ outflows (principal only) on account of the
borrowing by issuance of these bonds, AD Category – I banks should report to
the Foreign Exchange Department, External Commercial Borrowings Division,
Central Office, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001, the
figures of actual drawdown(s) / repayment(s) by their constituent borrowers
quoting the related loan registration number. Such reporting by email shall
be made on the date of transaction itself. This reporting will be in
addition to the returns filed with the Department of Statistics and
Information Management of the Reserve Bank (viz Form 83 and ECB 2 Return) as
in the case of availment of External Commercial Borrowings (ECB).
- All other provisions of Circular dated September 29, 2015 remain
unchanged. AD Category-I banks may bring the contents of this circular to
the notice of their constituents and customers.
- The changes / revised instructions in respect of issuance of Rupee
denominated bonds as mentioned at paragraph no. 3 to 7 above, will be
applicable from the date of issuance of this Circular. Transactions already
carried out as per earlier instructions / pipe line transactions where LRN
has already been obtained / proposals where agreement have already been
signed and / or offer document already issued may be concluded as per
provisions contained in Circular dated September 29, 2015. Post-facto
reporting of actual transactions, already undertaken shall, however, be made
to the Foreign Exchange Department immediately at the email given in
paragraph no.8 above.
- Relevant paragraphs of the Master Directions No. 5 dated January 01,
2016 issued by RBI are being updated to reflect the changes.
- 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
Shekhar Bhatnagar
Chief General Manager-in-Charge
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