Debenture redemption reserve norm goes for listed cos, NBFCs

Our Bureau The Centre has removed Debenture Redemption Reserve (DRR) requirement for listed companies, NBFCs and housing finance companies (HFCs).

This has been done consequent to the Budget announcement to this effect by the Union Finance Minister Nirmala Sitharaman and the Centre’s objective of providing greater ‘Ease of Doing Business’ to companies as part of its 100 Days Action plan.

The Corporate Affairs Ministry (MCA) has now amended its share capital and debenture rules to remove the requirement for creation of a DRR of 25 per cent of the value of outstanding debentures in respect of listed companies, NBFCs registered with the RBI and for HFCs registered with National Housing Bank (NHB) both for public issue as well as private placements

For unlisted companies, the DRR has been reduced from the present level of 25 per cent to 10 per cent of the outstanding debentures. Hitherto, listed companies had to create a DRR for both public issue as well as private placement of debentures, while NBFCs and HFCs had to create DRR only when they opted for public issue of debentures.

The latest move is aimed at creating a level-playing field between NBFCs, HFCs and listed companies’ on the one hand and also between them and banking companies and financial institutions on the other, which are already exempted from DRR, an official release said.

The measure has been taken by the government with a view to reducing the cost of the capital raised by companies through issue of debentures and is expected to significantly deepen the bond market, the release added.