RBI lets companies raise Rs 5K-cr masala bonds via automatic route

Mumbai: RBI on Wednesday said an entity can borrow a maximum of Rs 5,000 crore in a fiscal through issuance of rupee-denominated masala bonds overseas under the automatic route.

The earlier cap was USD 750 million. The change has been made following fixing of an aggregate limit of foreign investment in corporate debt in rupee terms as against the dollar.

"As the overall limit is now prescribed in rupee terms, the maximum amount which can be borrowed by an entity in a financial year under the automatic route by issuance of these bonds will be Rs 50 billion and not USD 750 million...," the RBI said in a notification.

Proposals to borrow beyond Rs 50 billion in a financial year will require prior approval of the Reserve Bank.

According to the monetary policy statement, the current limit of USD 51 billion for foreign investment in corporate debt has been fixed in rupee terms at Rs 2,44,323 crore.

Issuance of rupee-denominated bonds overseas will be within this aggregate limit of foreign investment in corporate debt, the central bank said.

RBI further said the rupee-denominated bonds can only be issued in a country and subscribed by a resident of a country that is a member of Financial Action Task Force (FATF) or a member of an FATF-style regional body.

Also, the country should have strategic anti-money laundering or combating the financing of terrorism deficiencies to which countermeasures apply.

Further, RBI has also reduced the minimum maturity period for masala bonds issued overseas to three years in order to align with the maturity prescription regarding foreign investment in corporate bonds through the foreign portfolio investment (FPI) route.