The Reserve Bank of India (RBI) has decided to allow foreign institutional investors (FIIs) to invest in primary issuances of non-convertible debentures (NCDs) and bonds by Indian companies. The RBI’s circular 89, published on 1 March, requires that the listing of the NCDs or bonds is committed to be done within 15 days of the investment.
Section 5 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (TISPRO), permits an FII to purchase listed NCDs or bonds. In line with a Securities and Exchange Board of India (SEBI) circular published on 5 April 2006, FII investments were restricted to listed debt securities of companies.
Subsequently, SEBI allowed FIIs to invest in primary debt securities through a circular issued on 26 November 2010, as long as the securities were committed to be listed within 15 days.
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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.
