The Reserve Bank of India (RBI) issued the "Master Direction – Reserve Bank of India (Commercial Paper and Non-Convertible Debentures of original or initial maturity up to one year) Directions 2024" on January 3, 2024.
The RBI's recent notification provides detailed guidelines for the issuance and regulation of CPs and NCDs. Key highlights include:
Applicability: These directions are effective from April 1, 2024, and apply to all entities dealing in CPs and NCDs of up to one year's maturity.
Eligible Issuers and Investors: Broadens the scope of entities that can issue CPs and NCDs. It includes companies, NBFCs, REITs, AIFIs, and other corporates meeting specific criteria. Both residents and non-residents, as per FEMA 1999, can invest in these instruments.
Issuance and Investment Conditions: CPs and NCDs must be issued in dematerialized form, in minimum denominations of ₹5 lakh, and follow specific tenor limits. They cannot be underwritten or co-accepted.
Credit Enhancement and Rating Requirements: Banks and AIFIs may provide credit enhancement. CPs and NCDs must have a minimum credit rating of ‘A3’.
Primary and Secondary Market Guidelines: Includes guidelines on issuance, subscription, trading, and settlement of CPs and NCDs. Secondary market trades must be settled through DvP (Delivery versus Payment) basis.
Repayment and Default Management: Specifies no grace period for repayment and details procedures for handling defaults and buybacks.
Reporting Requirements: Mandates timely reporting of primary issuances, secondary market transactions, buybacks, and defaults.
Roles and Responsibilities: Outlines the responsibilities of Issuing and Paying Agents, Debenture Trustees, and Credit Rating Agencies.
These directions aim to strengthen the framework for short-term debt instruments, enhancing transparency and investor protection.
Disclaimer: This summary is for informational purposes only. Professionals are advised to refer to the full RBI document for comprehensive details.