The Indian financial services sector (particularly the non-banking financial services sector) has been in the front-page news since October 2018. Last year, as the world marked the 10th anniversary of the global financial crisis triggered by the collapse of Lehman Brothers, ironically, the default on payments by certain large NBFCs (such as IL&FS), sparked panic across the sector.
Taking into account the deepening liquidity crisis in the financial services sector and the resultant failure of some of the biggest non-banking financial companies (NBFCs) in discharging their immediate debt obligations, the Indian government finally took the bull by the horns.
Commercial Papers (CPs) in India are regulated by Reserve Bank of India (RBI) and governed by the RBI directions (RBI CP Directions) which lays down the eligibility requirements, disclosure norms, rating and documentation procedures. Further, the Fixed Income Money Market and Derivatives Association of India (FIMMDA) prescribes standard procedures and documentation for issuance of CPs in compliance with guidelines issued by FIMMDA on 5 October 2017 (FIMMDA Operational Guidelines).
The Reserve Bank of India (RBI) issued a long pending clarification on permissibility of bank lending to Infrastructure Investment Trusts (InvITs) vide Circular no. RBI/2019-20/83 DBR.No.BP.BC.20/08.12.014/2019-20 dated 14 October 2019 (RBI Circular). InvITs are registered with Securities and Exchange Board of India and are regulated by Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014, as amended (SEBI InvIT Regulations).
Rajeev Vidhani is a Partner in the banking & finance and Insolvency & restructuring team at Khaitan & Co., Mumbai. He has a special focus on private credit, special situations and distressed acquisition transactions.
In view of stakeholder comments and in order to provide a diverse source of funds, reduce stress and ease the liquidity crisis for corporates in certain sectors, the Reserve Bank of India (RBI) has relaxed the restrictions relating to external commercial borrowings (ECB) vide its press release 2019-2020/285 dated 30 July 2019 and Circular RBI/2019-20/20 A.P. (DIR Series) Circular No. 04 (Circular).
Close on the heels of overhauling the external commercial borrowing regime in India, the Reserve Bank of India (RBI) released a revised framework on the extant policy on trade credits (Trade Credits) vide its circular titled “Trade Credit Policy – Revised Framework” dated 13 March 2019 (Revised Framework) in what appears to be an attempt to give impetus to the import of goods into India. The Revised Framework came into force with immediate effect from the date of issuance of the circular i.e., 13 March 2019.
The Reserve Bank of India (RBI), in its Statement on Developmental and Regulatory Policies dated 5 October 2018 recognised that while several measures had been undertaken in the recent past to facilitate foreign portfolio investment (FPI) in the Indian debt market, additional liberalized regimes were required to encourage FPIs willing to undertake long-term investments in India to invest into India and in this backdrop, a special route called ‘Voluntary Retention Route’ (VRR) was announced by the RBI.
The Reserve Bank of India (RBI) through its circular dated 15 February 2019 (RBI Circular) relaxed one of the restrictions imposed on foreign portfolio investors (FPIs) while investing in the Indian debt market. On 15 June 2018, the RBI had introduced certain conditions for FPIs looking to invest through the bond route in India (2018 Circular). Although under the 2018 Circular, the RBI had relaxed the minimum maturity period requirements for FPIs (reducing the period from 3 years to 1 year), it had also imposed single/group investor-wise limits in corporate bonds.
