What changed
RBI clarified that issuers maintaining facilities with multiple banks can obtain the required asset quality certificate from any one bank, provided they give an undertaking that accounts with other banks are standard assets. Additionally, for NCDs issued in multiple tranches under a single valid rating, each tranche need not be separately certified by the auditor; only fresh ratings require a new auditor's certificate.
What it means for you
This reduces compliance burden for issuers with multiple banking relationships by allowing a single certificate instead of one from each bank. For lenders, it streamlines the NCD issuance process, making multi-tranche offerings more efficient. Banks must ensure the undertaking from the issuer is properly documented and verified by the auditor.
What you must do
- Update internal NCD issuance procedures to accept a single bank certificate for asset quality when issuer has multiple banking relationships.
- Ensure auditors verify that the issuer's undertaking about standard asset status with other banks is on record.
- For multi-tranche NCDs under one rating, confirm that separate auditor certification per tranche is not required unless a fresh rating is obtained.
- Train compliance teams on the clarified rules for NCD issuance documentation.
Who it affects
NCD issuers with multiple banking relationships, Banks providing asset quality certificates, Auditors certifying NCD eligibility, Market participants involved in NCD issuance
Can an issuer with multiple banks get a certificate from any one bank?
Yes, as per the clarification, the issuer can obtain the certificate from any one bank, provided it gives an undertaking that accounts with other banks are classified as standard assets.
Does each tranche of a multi-tranche NCD need a separate auditor certificate?
No, if the issuance is based on a single valid rating for the consolidated amount, each tranche does not need separate certification. Only a fresh rating for a new issuance requires a new auditor's certificate.