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RBI/2016-17/107
A.P. (DIR Series) Circular No. 14
November 03, 2016
To
All Category-I Authorised Dealer Banks
Madam / Dear Sir
Issuance of Rupee denominated bonds
overseas by Indian banks
Attention of Authorised Dealer Category - I (AD Category - I) banks is
invited to the measures announced by the Reserve Bank on August 25, 2016 for
development of Fixed Income and Currency Markets in India which, inter alia,
proposed to permit banks to issue Rupee Denominated Bonds overseas for their
capital requirements and for financing infrastructure and affordable housing and
Circular DBR.BP.BC.No.28/21.06.001/2016-17 dated November 3, 2016.
2. In line with the announcement made, with a view to developing the market
of Rupee Denominated Bonds overseas, as also providing an additional avenue for
Indian banks to raise capital / long term funds, it has been decided, after
consultation with the Government, to allow Indian banks, within the limit set
for foreign investment in corporate bonds (INR 244323 crore at present), to
issue:
-
Perpetual Debt Instruments (PDI) qualifying for inclusion as Additional
Tier 1 capital and debt capital instruments qualifying for inclusion as Tier
2 capital, by way of Rupee Denominated Bonds overseas; and
-
Long term Rupee Denominated Bonds overseas for financing infrastructure
and affordable housing.
3. Provisions contained in
A.P. (DIR Series) circular No. 17 dated September 29, 2015 and
A.P. (DIR Series) circular No.60 dated April 13, 2016 on Issuance
of Rupee Denominated Bonds Overseas read with paragraph No. 3.3.2 and 3.3.3 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 as amended from time to time, which
allow Indian banks to participate in the space of Rupee Denominated Bonds
Overseas only as arrangers and underwriters but not as issuers, accordingly,
stand modified for the limited purpose of treating Indian banks as eligible
borrowers under this route. The instruments (PDI and debt capital instruments)
and long terms bonds, as mentioned in paragraph 2 above, issued by Indian banks
by way of Rupee Denominated Bonds overseas should, however, conform to the
provisions contained in the Master Circular DBR.No.BP.BC.1/21.06.201/2015-16
dated July 01, 2015 on ‘Basel III Capital Regulations’ and Circular
DBOD.BP.BC.No. 25/08.12.014/2014-15 dated July 15, 2014 on ‘Guidelines on Issue
of Long Term Bonds by Banks – Financing of Infrastructure and Affordable
Housing’ issued by the Reserve Bank and as amended from time to time. Further,
underwriting by overseas branches/subsidiaries of Indian banks for such
issuances will not be allowed.
4. All other provisions of aforesaid circulars dated September 29, 2015 and
April 13, 2016 remain unchanged.
5. The changes / revised instructions in respect of issuance of Rupee
denominated bonds will be applicable from the date of issuance of this circular.
6. Relevant paragraphs of the Master Direction No. 5 dated January 01, 2016
are being updated to reflect the changes.
7. 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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