RBI revises norms for non-convertible debenture issue

A corporate entity should have tangible net worth of not less than Rs4 crore, as per the latest audited balance sheet, and should have sanctioned working capital limit or term loan by banks or all-India financial institutions to be eligible to issue non-convertible debentures (NCDs) of original or initial maturity up to one year, the Reserve Bank of India said today.

The borrowal account of the corporate is classified as a standard asset by the financing banks or institutions.

An eligible corporate intending to issue NCDs should obtain credit rating for issuance of the NCDs from one of the rating agencies, viz., the Credit Rating Information Services of India Ltd. (CRISIL) or the Investment Information and Credit Rating Agency of India Ltd. (ICRA) or the Credit Analysis and Research Ltd. (CARE) or the FITCH Ratings India Pvt Ltd or such other agencies registered with Securities and Exchange Board of India (SEBI) or such other credit rating agencies as may be specified by the Reserve Bank of India from time to time, for the purpose, an RBI release said.

The minimum credit rating to be eligible for NCD issue would be P-2 of CRISIL or such equivalent rating by other agencies, the release said, adding that the issuer should ensure at the time of issuance that the rating is current and is not due for review.

The CRA will have the discretion to determine the validity period of the rating depending upon its perception about the strength of the issuer. Accordingly, CRA should, at the time of rating, clearly indicate the date when the rating is due for review.

While the CRAs may decide the validity period of credit rating, they should closely monitor the rating assigned to corporates vis-à-vis their track record at regular intervals and make their revision in the ratings public through their publications and website.