JUN 14, 2017

Issuance of Rupee Denominated Bonds Overseas

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RBI has issued a notification vide A. P. (DIR Series) Circular No.47 dated 7th June, 2017 to harmonize the various elements of the ECB framework. By virtue of the said harmonization, the framework for issuance of rupee denominated bonds has been revised.

The key features of this notification are as follows:

  1. Under the revised framework, any proposal of borrowing by eligible Indian entities by issuance of these bonds will be examined at the Foreign Exchange Department (FED), Central Office, Mumbai.
  2. The tenure of minimum maturity has now been decided taken into consideration the amount of bonds raised overseas. Thus, the minimum maturity period for the bonds raised upto USD 50 million equivalent in INR per Financial Year (‘FY’) shall be 3 years and for bonds raised above USD 50 million equivalent in INR per financial year shall be 5 years.
  3. Related Partied within the meaning of Ind-AS 24 cannot subscribe or invest in or purchase such bonds.
  4. The all-in-cost ceiling for such bonds will be 300 basis points over the prevailing yield of the Government of India securities of corresponding maturity.

A comparative analysis of previous and revised framework for issuance of rupee denominated bonds is summarized hereinbelow:

Particulars Previous Framework Revised Framework
Routes for issuance Automatic: Upto USD 50 million equivalent in INR per FY
Approval: Above USD 50 million equivalent in INR per FY
Every proposal shall be examined by FED, Central Office, Mumbai
Minimum Maturity 3 Years 3 Years: Upto USD 50 million equivalent in INR per FY
5 Years: Above USD 50 million equivalent in INR per FY
Related Party as per Ind-AS 24 Can subscribe or invest in the bonds Cannot subscribe or invest in the bonds
All-in-Cost Should be commensurate with prevailing market conditions 300 basis points over the prevailing yield of Government security of like maturity.

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