RBI allows Non-Deposit taking NBFCs to raise Short Term Foreign Funds
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.
As a temporary measure, RBI has decided on 31st October 2008, 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).
vii) The borrowings should be fully swapped into Rupees for the entire maturity.
NBFC- ND-SIs proposing to avail of the facility should apply to Reserve Bank of India, Central Office, Mumbai, with full details for the necessary approval.
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