What changed
Previously, FEMA regulations restricted resident borrowers from using rupee loans from non-residents for investments or relending. This circular relaxes that rule for government-authorized entities issuing specific rupee bonds, allowing them to on-lend to infrastructure or hold funds in fixed deposits.
What it means for you
Banks can now facilitate infrastructure financing through these bonds, as authorized entities can channel foreign investment into the sector. This may increase demand for such bonds and create new lending opportunities for banks in infrastructure projects.
What you must do
- Inform AD Category-I bank customers about this circular's provisions.
- Verify that entities issuing these bonds have government authorization before processing transactions.
- Ensure compliance with FEMA regulations when handling bond proceeds for infrastructure lending or fixed deposits.
Who it affects
AD Category-I banks, Government-authorized Indian entities issuing rupee bonds to non-residents, Infrastructure sector borrowers
Can any Indian company issue these bonds to non-residents?
No, only entities specifically authorized by the Government of India can issue these tax-free, secured, redeemable, non-convertible rupee bonds.
What can the bond proceeds be used for?
The funds can be used for on-lending or relending to the infrastructure sector, or kept in fixed deposits with banks in India until they are utilized for permissible end-uses.