Minimum subscription fixed at Rs 20,000 for pvt placement of NCDs by NBFCs

New rule applicable on private placement of NCDs with maturity of more than one year

The Reserve Bank of India (RBI) on Friday said that non-banking finance companies (NBFCs) raising money through private placement of non-convertible debentures (NCDs) having maturity of more than one year should ensure that minimum subscription per investor must be Rs 20,000.

"The issuance of private placement of NCDs shall be in two separate categories, those with a maximum subscription of less than Rs 1 crore and those with a minimum subscription of Rs 1 crore and above per investor. There shall be a limit of 200 subscribers for every financial year, for issuance of NCDs with a maximum subscription of less than Rs 1 crore, and such subscription shall be fully secured," the banking regulator said in a notification.

However, there will be no limit on the number of subscribers in respect of issuances with a minimum subscription of Rs 1 crore and above and the option to create security in favour of subscribers will be with the issuers. "Such unsecured debentures shall not be treated as public deposits," RBI said.

Also, NBFCs (excluding core investment companies) should issue debentures only for deployment of funds on its own balance sheet and should not facilitate resource requests of group entities, parent company or associates. NBFCs are also not permitted to extend loans against the security of its own debentures.

These new rules, however, will not be applicable on tax exempt bonds offered by NBFCs.

The central bank also directed NBFCs to put in place a board approved policy for resource planning that should cover the planning horizon and the periodicity of private placement.