The Reserve Bank of India on Wednesday said its forex department will henceforth examine the proposal of companies to float rupee denominated bonds — popularly known as masala bonds — for fund mobilisation from overseas markets.
“On a review of the laid down framework for issuance of rupee denominated bonds overseas and with a view to harmonise the various elements of the ECB framework, it has been decided that any proposal of borrowing by eligible Indian entities by issuance of these bonds will be examined at the foreign exchange Department,” the RBI said.
The RBI has also revised provisions for maturity period, all-in-cost ceiling and recognised lenders (investors) of masala bonds. For bonds up to $50 million per fiscal, the maturity period will be three years and for bonds raising over $50 million (equivalent in rupee) per fiscal should be five years. Earlier, the minimum maturity period was of five years.
“The all-in-cost ceiling for such bonds will be 300 bps over the prevailing yield of the govt securities of corresponding maturity,” the RBI said. For recognised investors, RBI said, the entities permitted as investors should not be related party.
Radhika Jain, director, Grant Thornton, said, “the RBI has tightened the norms — raising of such debt would now be subject to RBI approval, will have to adhere to all-in-cost ceilings and cannot be issued to related parties. This restricts the flexibility to access debt funds, especially from group entities for which Indian firms will need to revert to the normal ECB route …”