The Reserve Bank of India (RBI) today issued draft guidelines for issue of non-convertible debentures (NCDs) with maturity of less than one year. NCDs are secured, negotiable money market instruments issued by corporates (including NBFCs) to meet their short term funding requirements, issued by way of private placement with investors.
The guidelines also cover NCDs with original maturity of more than one year with option attached to it, which can be exercised within a year from the date of issue, an RBI said in a release.
Any company or individual having a tangible net worth of not less than Rs4-crore as per the latest audited balance sheet, any company that has been sanctioned working capital limit by bank/s or all-India financial institution/s, and a company whose borrowal account is classified as a `standard asset' by the financing bank/institution is eligible to issue NCDs of less than one year, RBI said.
"An eligible corporate intending to issue NCDs will have to obtain credit rating for issuance of the NCDs from one of the rating agencies, viz, the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd (ICRA) or the Credit Analysis and Research Ltd (CARE) or the FITCH Ratings India Pvt Ltd or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose," the RBI release said.
To be eligible for issue of NCDs, the minimum credit rating should be P-2 of CRISIL or such equivalent rating by other agencies. The issuers should ensure at the time of issuance of NCDs that the rating so obtained is current and has not fallen due for review.
NCDs should not be issued for maturities of less than 90 days from the date of issue - the exercise date of option (put/call), if any, attached to the NCDs should not fall within 90-day period from the date of issue. The maturity date of the NCD should also be co-terminus with the date up to which the credit rating of the issuer is valid.