RBI/2015-16/69
DBR.No.FID.FIC.1/01.02.00/2015-16

July 1, 2015

All-India Term Lending and Refinancing Institutions
(Exim Bank, NABARD, NHB and SIDBI)

Dear Sir,

Master Circular - Resource Raising Norms for Financial Institutions

Please refer to Master Circular DBOD.No.FID.FIC.1/01.02.00/2014-15 dated July 01, 2014 containing the instructions/guidelines issued to FIs till June 30, 2014 relating to Resource Raising Norms. This Master Circular consolidates instructions on the above matters issued up to June 30, 2015

Yours faithfully,

(Sudha Damodar)
Chief General Manager-in-Charge

Master Circular on
Resource Raising Norms for Financial Institutions

Purpose

To facilitate the specialised financial institutions (FIs) to meet their short-term and long-term resource requirements so as to enable the FIs to cater to sectoral needs of credit linked to the operations, purpose and objectives with which the FIs were set up as per their respective statutes. This circular also aims at providing level-playing field, by bringing broad convergence in regulatory norms among financial institutions with regard to issue of bonds by them.

Previous Instructions

This master circular consolidates and updates all the instructions/guidelines issued by the Reserve Bank of India relating to resource raising by financial institutions contained in the circulars listed in Annex 4.

Application

To all the all-India term-lending and refinancing institutions, viz., Exim Bank, National Bank for Agriculture & Rural Development (NABARD), National Housing Bank (NHB) and Small Industries Development Bank of India (SIDBI).

1. Introduction

All financial Institutions, whether statutory bodies or limited companies, are subject to RBI regulations since 1998. FIs play an important role in the financial markets and facilitate fund raising resource allocation etc. Initially, the RBI had prescribed instrument-wise limits for mobilisation of resources by the select FIs through the specified instruments. In May 1997, the instrument-wise ceilings were replaced by an “umbrella limit” linked to the ‘net owned funds’ of the FI concerned, which constituted the overall ceiling for borrowing by the FI through the specified instruments. The system of umbrella limit remains in force even now though a few additional instruments have been included under the limit, over the years.

2. Norms for Resource Raising under the 'Umbrella Limit'

The ‘umbrella limit’ at present consists of five instruments viz., term deposits, term money borrowings, certificates of deposits (CDs), commercial papers (CPs) and inter-corporate deposits (ICDs). The aggregate borrowings through these specified instruments should not at any time exceed 100 per cent of net owned funds (NOF) of the FI concerned as per its latest audited balance sheet or as approved by RBI for individual financial institutions. The terms and conditions relating to each of the instruments are set out below.

2.1 Term Deposits

2.2 Term Money Borrowings

2.3 Certificates of Deposit (CDs)

2.4 Commercial Papers (CPs)

2.5 Inter Corporate Deposits (ICDs)

The RBI has not prescribed any norms for raising of resources through ICDs by the FIs. However, the FIs which are structured as companies under the Companies Act 1956, are eligible to issue ICDs as permissible under the Act. The amount of resources raised through ICDs should be within the overall umbrella limit fixed by the RBI. Thus, the issue of ICDs together with other instruments viz. term money, term deposits, CDs and CPs should not exceed 100 per cent of its net owned funds as per the latest audited balance sheet.

3. Norms regarding Issue of Bonds / Debentures

3.1 FIs are not required to seek issue-wise prior approval/registration from the RBI for raising resources by way of issue of bonds, whether by public issue or through private placement, subject to the fulfillment of the following conditions :

i) The minimum maturity of the bond should be 3 years;

ii) In respect of bonds having call / put or both options, the same should not be exercisable before the expiry of one year from the date of issue of bonds;

iii) No 'Exit' option on the bonds should be offered before the end of one year, from the date of issue.

3.2 The outstanding of total resources mobilised at any point of time by an FI, including the funds mobilised under the 'umbrella limit', as prescribed by the Reserve Bank, should not exceed 10 times its net owned funds as per its latest audited balance sheet or as approved by RBI for individual financial institutions.

3.3 The limit fixed for raising resources is only an enabling provision. FIs are advised to arrive at their requirements of resources along with the maturity structure and the interest rate offered thereon on a realistic basis, derived, inter alia, from a sound ALM / Risk Management system.

3.4 In case of floating rate bonds, FIs should seek prior approval from the Reserve Bank, in regard to 'reference rate' selected and the methods of floating rate determination. The same is not required for subsequent individual issues so long as the underlying reference rate and method of floating rate determination remain unchanged.

3.5 Fls should take note to comply with the prudential requirements of other regulatory authorities such as SEBI, etc.

3.6 Fls are required to furnish monthly statements to the RBI in the specified formats given at Annex 2 and Annex 3. The statements relating to a month are to be submitted on or before the 10th day of the following month. The details in respect of public issue of bonds are to be incorporated in the statement for the month during which the respective issue is closed.

3.7 The statements are to be sent to the Chief General Manager, Financial Institutions Division, Department of Banking Regulation, Reserve Bank of India, Central Office, 13th Floor, COB, Shahid Bhagat Singh Marg, Mumbai - 400 001; Fax No. 22701238.

Annex 1

Schedule I
(Para 2.3)

Proforma of Certificates of Deposit (CDs)

To be stamped as per the applicable rate in force in the
State in which it is to be issued

(Name of the Issuing Company / Institutions)

Serial No.

Issued at :______________________ (Place)

Date of issue :______________________

Date of Maturity: ___________________________ without days of grace.

(If such date happens to fall on a holiday, payment shall be made on the immediate preceding working day)

For value received ___________________________________hereby (Name of the issuing Company / Institution) hereby Promises to pay ________________________________ or order on the (Name of the Investor) maturity date as specified above the sum of Rs. ___________________ (in words) upon presentation and surrender of this Certificates of Deposit to _______________________________________________ (Name of the issuing and paying Agent)

For and on behalf of ____________________ (Name of the issuing Company/Institution)

Authorised Signatory / Signatories

Authorised Signatory

All endorsements upon this Certificates of Deposits must be clean and distinct. Each endorsement should be written within the space allotted.

Pay to_____________________________________(Name of Transferee) or order the amount within named.

For and on behalf of _______________________________(Name of the Transferor)

1.           “
2.           “
3.           “
4.           “

Schedule II
(Para 2.4)

Proforma of Commercial Paper (CP)

To be stamped as per the applicable rate in force in the
S tate in which it is to be issued

(Name of the Issuing Company / Institutions)

Serial No.

Issued at :______________________ (Place)

Date of issue :______________________

Date of Maturity: ___________________________ without days of grace.

(If such date happens to fall on a holiday, payment shall be made on the immediate preceding working day)

For value received ___________________________________hereby (Name of the issuing Company / Institution) hereby Promises to pay ________________________________ or order on the (Name of the Investor) maturity date as specified above the sum of Rs. ___________________ (in words) upon presentation and surrender of this Commercial Paper to _______________________________________________ (Name of the issuing and paying Agent)

For and on behalf of ____________________ (Name of the issuing Company/Institution)

Authorised Signatory / Signatories

Authorised Signatory

All endorsements upon this commercial paper must be clean and distinct. Each endorsement should be written within the space allotted.

Pay to_____________________________________(Name of Transferee) or order the amount within named.

For and on behalf of _______________________________(Name of the Transferor)

1.           “
2.           “
3.           “
4.           “

Schedule III
(Para 2.4)

IPA Certificate

We have a valid IPA agreement with the ___________ (Name of Issuing Company / Institution)

2. We have verified the documents viz., board resolution and certificate issued by Credit Rating Agency submitted by _____________________ (Name of the Issuing Company / Institution) and certify that the documents are in order. Certified copies of original documents are held in our custody.

3. * We also hereby certify that the signatures of the executants of the attached Commercial Paper bearing Sr. No. ______________ dated _______________ for Rs._______________ (Rupees ____________________________________) (in words) tally with the specimen signatures filed by _______________________________ ( Name of the issuing Company / Institution).

(Authorised Signatory / Signatories)

(Name and Address of Issuing and Paying Agent)

Place :
Date :

*(Applicable to Commercial Paper in Physical Form/Strike out if not applicable)

Schedule IV
(Para 2.4)

Details of Defaults on Repayment of CP

Schedule V
(Para 2.4)

Reporting of buyback of CPs

Annex – 2
(Para 3.3.6)

Monthly Consolidated Return on Aggregate Resources Raised

1. Reporting Institution                                                       :

2. Report for the month ended                                            :

3. Date of Report                                                               :

4. Overall Borrowing Limit(10 times of NOF)                         :   Rs                  Crore

5. NOF as per the Audited Balance Sheet dated ______       :   Rs_________Crore

6. Amount of Borrowing outstanding at the end of      :

Month_________                                                    :  Rs__________Crore

Annexure - 3
(Para 3.3.6)

Monthly Return on Resources Raised through Bonds

Total amount raised during the month of ___________ Rs ___________ crore

Cumulative amount raised during the year (April-March) Rs.___________ crore

@ Only the issue that has already been completed to be included.
# The date of issue open for public subscription /private placement to be mentioned

Annex - 4

List of Circulars Consolidated in the Master Circular