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Our Bureau

Mumbai , Nov. 11

SEBI-registered foreign institutional investors have been allowed to invest in the Security Receipts (SRs) issued by Asset Reconstruction Companies.

This follows the Government's decision to allow 49 per cent FDI in ARCs.

In a press release issued on Friday, the RBI said FIIs can now invest up to 49 per cent of each tranche of scheme of SRs subject to the condition that investment of a single FII in each tranche of scheme of SRs shall not exceed 10 per cent of the issue.

SRs are essentially bonds issued by ARCs to banks when they buy bad loans from them.

Normally, when ARCs buy bad assets from banks, they do not pay cash upfront. They buy the stressed assets through SRs, which are essentially bonds that can be redeemed later. The bonds (SR) are issued up to a maximum period of seven years.

As per the RBI notifications, the policy on FII and FDI investments would be reviewed after one year, the RBI said.

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