Business

NBFCs-ND-SI allowed to issue PDIs to augment capital

CHENNAI: The systemically important non-deposit taking non-banking financial companies (NBFCs-ND-SI), with asset size of Rs. 100 crore and above, have been allowed to raise their capital funds by issue of perpetual debt instruments (PDI). Such PDIs will be eligible for inclusion as Tier-I capital to the extent of 15 per cent of total Tier-I capital as on March 31 of the previous accounting year, according to a notification issued by the Reserve Bank of India (RBI).

The notification said that the minimum investment in each such issue/tranche by a single investor should not be less than Rs.5 lakh. The funds thus raised by NBFCs-ND-SI would not be treated as ‘public deposit’. The amount of PDI in excess of amount admissible as Tier-I would qualify as Tier-II capital within the eligible limits.

The PDIs could be issued as bonds or debentures in Indian currency only. Though they could raise PDIs in tranches, the aggregate amount to be raised should be within the overall limits of Tier-I and Tier-II capital. The interest payable to the investors could be either at a fixed rate or at a floating rate referenced to a market-determined rupee interest bench-mark rate, the notification further said. PDIs could be issued only as plain vanilla instruments. However NBFCs-ND-SI could issue PDIs with a ‘call option’, subject to strict compliance with certain conditions. The issuing NBFC-ND-SI could have a step-up option for increasing the rate of interest payable on PDIs. Such option, however, could be exercised only once during the whole life of the instrument after the lapse of 10 years from the date of issue. The step-up shall not be more than 100 bps in reference to interest rate advertised in terms of offer document.

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