What changed
RBI restricted NBFC private placements to a maximum of 49 investors, with a minimum subscription of Rs 25 lakh per investor and a six-month gap between issues. It also mandated full security cover for all debentures and prohibited loans against own debentures.
What it means for you
NBFCs can no longer raise large retail funds through private placement of debentures, as the 49-investor cap and high ticket size limit retail participation. This reduces systemic risk but may constrain funding for smaller NBFCs. Lenders must ensure debentures are fully secured at all times, with proceeds held in escrow until security is created within one month.
What you must do
- Review and revise private placement offer documents to comply with the 49-investor cap and Rs 25 lakh minimum subscription.
- Ensure a minimum six-month gap between successive private placements.
- Create full security cover for all debentures within one month of issue, using escrow for proceeds until then.
- Stop extending loans against your own debentures, whether issued via private placement or public issue.
Who it affects
All NBFCs including Primary Dealers, NBFC treasury and compliance teams, Investors in NBFC private placements
Does the 49-investor limit apply to each private placement or cumulatively?
The limit applies to each private placement issue. An NBFC cannot have more than 49 investors in a single private placement tranche.
What happens if security cover is not created at the time of debenture issue?
Issue proceeds must be placed in an escrow account until full security is created, which must happen within one month from the date of issue.
Can NBFCs issue unsecured debentures under these guidelines?
No. All debentures, including short-term NCDs, must be fully secured at all times. Unsecured debentures are treated as public deposits under RBI rules.