RBI allowed Indian companies to issue non-convertible debentures

The Reserve Bank of India on 6 January 2014 allowed the Indian companies to issue non-convertible or redeemable preference shares or debentures to non-resident shareholders as bonus. This facility will also encompass the depositories that act as the trustees for the American Depository Receipt/Global Depository Receipt – ADR/GDR holders.

The decision has been taken by RBI in order to rationalize and to simplify the procedures that the company will issue shares or debentures by way of distribution as bonus from its general reserves.

As per the notification, has made the preference shares, which excludes non-convertible/redeemable preference shares and convertible debentures, (except optionally convertible or partially convertible debentures) a subject of Foreign Direct Investment Scheme. Earlier, RBI was granting permission for such issuances on a case-to-case basis.

RBI has simplified the norms following the references of some companies of India for issuing a non-convertible or redeemable bonus preference shares or debentures to non-resident shareholders from their general reserve under a scheme. This has been permitted with an arrangement by a court following the provisions of the Companies Act.

Apart from this RBI in another notification said that the Maintenance, Repairs and Overhaul (MRO) will be treated as the part of the airport infrastructure, which will facilitate external commercial borrowings for the sector.

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