Business Daily from THE HINDU group of publications
Wednesday, Nov 04, 2009
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Business Daily from THE HINDU group of publications Wednesday, Nov 04, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Money & Banking
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Corporate Bonds Web Extras - RBI & Other Central Banks Minimum face value of short-term NCDs should be Rs 5 lakh: RBI Our Bureau Mumbai, Nov. 3 The minimum face value of short-term (less than one-year maturity) non-convertible debentures (NCDs) should be Rs 5 lakh with a maturity of at least 90 days, according to the draft guidelines issued by the RBI on Tuesday. The exercise date of any put or a call option attached to the NCDs should also not fall within 90 days from the date of issue. The draft guidelines, framed along the lines of the issuance guidelines for commercial paper (CP), are an effort to minimise risks to investors and curb speculation, said a senior India-based regulatory expert. These guidelines would also apply to any NCD which has an option attached to it and is exercisable within a year from the date of issue. The Reserve Bank of India, in its second quarter review of the Monetary Policy, had said that issuance of non-convertible debentures (NCDs) with maturity of less than one year will be bought under RBI’s purview. An issuer of short-term NCD would need to have a tangible net worth of over Rs 4 crore and would need to obtain credit rating for the securities. Investors for the debt issuance can include individuals, corporations, non-resident Indians, and foreign institutional investors — within the limit set by market regulator SEBI. The process of issuance and appointment of debenture trustee would be in accordance with existing SEBI regulation. “If a NCD is issued with a term of less than 90 days, an issuer gets to save upon significant amount of stamp duty,” said Mr R. Shankar Raman, Executive Vice-President (Finance), Larsen & Toubro. Once the current guidelines are enacted issuance costs of NCDs will go up, he added. The NCDs will compete with CPs as both are a short-term fund raising instrument for the corporates, said a treasury head with a public sector bank. CPs are issued for a period of 15 days to one year to meet the working capital requirements. The NCDs as and when they are listed and traded, will be regulated by SEBI. More Stories on : Corporate Bonds | RBI & Other Central Banks
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