Regulation 5 - Borrowing in rupees by Indian companies - Foreign Exchange Management (Borrowing And Lending In Rupees) Regulations, 2000

5. Borrowing in rupees by Indian companies:- (1) Subject to the provisions of sub-regulations (2) and (3), a company incorporated in India may borrow in rupees on repatriation or non-repatriation basis, from a non-resident Indian or a person of Indian origin resident outside India, by way of investment in Non-convertible Debentures (NCDs) subject to the following conditions; (i) the issue of Non-convertible Debentures (NCDs) is made by public offer; (ii) the rate of interest on such Non-convertible Debentures (NCDs) does not exceed the prime lending rate of the State Bank of India as on the date on which the resolution approving the issue is passed in the borrowing company's General Body Meeting, plus 300 basis points, (iii) the period for redemption of such Non-convertible Debentures (NCDs) is not be less than three years; (iv) the borrowing company does not and shall not carry on agricultural /plantation /real estate business/Trading in Transferable Development Rights (TDRs) or does not and shall not act as Nidhi or Chit Fund company; (v) the borrowing company files with the nearest office of the Reserve Bank, not later than 30 days from the date - (A) of receipt of remittance for investment in Non-convertible Debentures (NCDs), full details of the remittances received, namely; (a) a list containing names and addresses of Non-resident Indians (NRIs) [****] who have remitted funds for investment in Non-convertible Debentures (NCDs) on repatriation and/or non-repatriation basis, (b) amount and date of receipt of remittance and its rupee equivalent; and (c) names and addresses of authorised dealers through whom the remittance has been received; (B) of issue of Non-convertible Debentures (NCDs), full details of the investment, namely; (a) a list containing names and addresses of Non-resident Indians (NRIs) [***] and number of Non-convertible Debentures (NCDs) issued to each of them on repatriation and/or non-repatriation basis and (b) a certificate from the Company Secretary of the borrowing company that all provisions of the Act, rules and regulations in regard to issue of Non-convertible Debentures (NCDs) have been duly complied with. (2) The borrowing by issue of non-convertible debentures on repatriation basis shall be subject to the following additional conditions, namely: (a) the percentage of Non-convertible Debentures (NCDs) issued to Non-resident Indians (NRIs) [***] to the total paid-up value of each series of Non-convertible Debentures (NCDs) issued shall not exceed the ceiling prescribed for issue of equity shares/ convertible debentures for foreign direct investment in India as specified by the Reserve Bank from time to time, under the relevant regulations, and (b) the amount of investment is received by remittance from outside India through normal banking channels or by transfer of funds held in the investor's Non-resident External (NRE)/Foreign Currency Non-resident (FCNR) account maintained with an authorised dealer or an authorised bank in India; (3) The borrowing by issue of non-convertible debentures (NCDs) on non-repatriation basis shall be subject to the following additional conditions, namely: (a) the amount of investment is received either by remittance from outside India through normal banking channels or by transfer of funds held in the investor's Non-resident External (NRE)/Non-resident Ordinary (NRO)/Foreign Currency Non-resident (FCNR)/Non-resident Non-repatriable (NRNR)/Non-resident Special Rupee (NRSR) account maintained with an authorised dealer or an authorised bank in India , (b) where the investment is made out of funds held in Non-resident Special Rupee (NRSR) account, the interest on such Non-convertible Debentures (NCDs) shall also not be repatriable outside India; and the maturity proceeds and interest on such debentures are credited only to the Non-resident Special Rupee (NRSR) account of the investor. 1 [(4) The borrowing by way of issue of preference shares on or after 30th day of April, 2007 other than those which are fully and mandatorily convertible into equity within a specified time and issue of convertible debentures on or after 7th day of June, 2007, other than those which are fully and mandatorily convertible into equity within a specified time, to a person resident outside India, shall be considered as debt and shall accordingly conform to Regulation 6 of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 (Notification No. FEMA. 3/2000-RB dated 3rd May, 2000) including the limits to such Borrowings as specified in the said regulations.] *********** Notes: 1. Inserted vide notification no. 183/2009 dated 20/1/2009