The Reserve Bank recently allowed Systemically Important Non-Deposit taking Non-Banking Financial Companies (NBFCs-ND-SI) to raise funds by issuing Perpetual Debt Instruments that can be included in their Tier 1 capital. It has now been decided as a temporary measure, to permit NBFCs-ND-SI to raise short- term foreign currency borrowings, under the approval route, subject to the following conditions.

i) Eligibility:  NBFCs-NDSI, complying with the prudential norms on capital adequacy and exposure norms.

ii) Eligible lenders:   Multilateral or bilateral financial institutions, reputable regional financial institutions, international banks and foreign equity holders with minimum direct equity holdings of 25 per cent.

iii) End-use: The resources should be used only for refinancing of short-term liabilities and no fresh assets should be booked out of the resources.

iv) Maturity: The maturity of the borrowing should not exceed three years.

v) Amount: The maximum amount should not exceed 50 per cent of the Net Owned Funds (NOF)  or USD 10 million (or its equivalent), whichever is higher.

vi) All-in-cost ceiling: The all-in-cost ceiling should not exceed 6 months Libor + 200 bps (for the respective currency of borrowing or applicable benchmark).

NBFC- ND-SIs proposing to avail of the facility should apply to the Chief General Manager –in- Charge, Department of Non Banking Supervision (DNBS), Reserve Bank of India, Central Office, Centre 1,  World Trade Centre, Cuffe Parade, Colaba, Mumbai - 400005 with full details for the necessary approval.

  Alpana Killawala
Chief General Manager

Press Release : 2008-2009/602