RBI enhances NBFCs’ capital raising option for capital adequacy purposes
Terms and conditions applicable to Perpetual Debt Instruments (PDI) for being eligible for inclusion in Tier I capital
2. Reporting Requirements
NBFCs-ND-SI issuing such instruments shall submit a report to the Regional Office in whose jurisdiction the NBFC is registered giving details of the debt raised, including the terms of issue specified at item 1 above together with a copy of the offer document soon after the issue is completed.
3. Investment in PDI issued by other NBFCs-ND-SI
An NBFC's investment in PDI issued by other NBFCs-ND-SI and financial institutions will be subject to definition of Net Owned Fund as defined in Section 45-IA of the RBI Act, 1934 and will attract risk weight as prescribed in Non-Banking Financial (Non- Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.
4. Grant of advances against PDI
NBFCs-ND-SI shall not grant advances against the security of the PDI issued by them.
5. Disclosure Requirement
(I) NBFCs-ND-SI shall make suitable disclosures in their Annual Report about:
(i) Amount of funds raised through PDI during the year and outstanding at the close of the financial year;
(ii) Percentage of the amount of PDI of the amount of its Tier I Capital;
(iii) Mention the financial year in which interest on PDI has not been paid in accordance with clause 1(viii) above.
(II) While framing policy as regards PDI, the Board of Directors of the NBFCs-ND-SI shall ensure that sufficient disclosures are made to the investor which clarify the type of the instrument, the risks associated and its uninsured nature so as to enable the investor to make informed investment decision. The offer document shall contain a clause that the investor may make investment decision on the basis of its own analysis and the RBI does not accept any responsibility about repayment of such investment. The policy evolved by the NBFCs-ND-SI shall also include provision as regards factors to be taken into account by the NBFC to demonstrate that it can meet extra load in case the company decides to step up the rate of interest under clause 1(vii) above. Board of Directors shall ensure strict compliance with all the terms and conditions set forth above.
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