The Reserve Bank of India (RBI) on January 03, 2024, issued the Master Direction – Reserve Bank of India (Commercial Paper and Non-Convertible Debentures of original or initial maturity upto one year) Directions, 2024.
These Directions will apply to all persons/agencies dealing in Commercial Paper and/or Non-Convertible Debentures of original or initial maturity upto one year.
The highlights of this direction are as stated:
• CPs and NCDs may be issued by the following entities subject to the condition that all fund-based facilities availed, if any, by the issuer from banks/ AIFIs / NBFCs are classified as Standard at the time of issue:
o Companies;
o NBFCs, including Housing Finance Companies (HFCs);
o InvITs and REITs;
o All India Financial Institutions (AIFIs);
o Any other body corporate with a minimum net worth of ₹100 crores, provided that the body corporate is statutorily permitted to incur debt or issue debt instruments in India; and
o Any other entity specifically permitted by the Reserve Bank.
• Co-operative societies and limited liability partnerships with a minimum net worth of ₹100 crores, may also issue CPs under these Directions, subject to the condition that all fund-based facilities availed, if any, by the issuer from banks/ AIFIs / NBFCs are classified as Standard at the time of issue.
• All residents are eligible to invest in CPs and NCDs.
• Non-residents are eligible to invest in CPs and NCDs to the extent permitted under the Foreign Exchange Management Act (FEMA), 1999 or the rules/regulations framed thereunder. Provided that no person, resident or non-resident, can invest in CPs and NCDs issued by related parties either in the primary or through the secondary market.
• CPs shall be issued at a discount to the face value.
• NCDs shall be issued at a discount to the face value or with a fixed or floating rate coupon.
• Funds raised through CPs and NCDs shall ordinarily be used to finance current assets and operating expenses. The end-use of the funds raised through a CP or an NCD shall be disclosed in the offer document.
These Directions shall come into force with effect from April 01, 2024.
For more details, kindly refer to the master direction provided below.
[Notification No. FMRD.DIRD.10/14.02.001/2023-24]
