Banks can stand guarantee for non-resident investments In a bid to attract foreign investments, the banking regulator has allowed banks to stand guarantee on behalf of non-residents acquiring shares or convertible debentures of an Indian company through open offers/delisting/exit offers without its prior approval. The Reserve Bank of India said a bank authorised to deal in foreign exchange can issue guarantee on behalf of person resident outside India for foreign direct investment transactions provided certain conditions are fulfilled. The conditions are that the transaction should be in compliance with the provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations; and the guarantee given by the bank should be covered by a counter-guarantee of a bank of international repute. The guarantee should be valid for a tenure co-terminus with the offer period as required under the SEBI (SAST) Regulations. In case of invocation of the guarantee, the bank is required to submit to the RBI’s Foreign Exchange Department a report on the circumstances leading to the invocation of the guarantee. Immediately after assuming charge as the RBI Governor on Wednesday, Raghuram Rajan set the ball rolling to attract foreign capital into the country. SAFE MONEY Rajan said the RBI wants to help banks bring in safe money to fund the country’s current account deficit. The RBI will open a special concessional window for swapping fresh FCNR (foreign currency non-resident) deposits that will be mobilised for a minimum tenor of three years and above, at a fixed rate of 3.5 per cent per annum for the tenor of the deposit. Further, to encourage banks to borrow overseas, their current overseas borrowing limit of 50 per cent of the unimpaired Tier I capital will be raised to 100 per cent. Borrowings mobilised under this provision can be swapped with the RBI at the option of the bank at a concessional rate of 100 basis points below the ongoing swap rate prevailing in the market. Eligible borrowers can get overseas borrowings under the approval route from their foreign equity-holder company with minimum average maturity of seven years for general corporate purposes, subject to conditions. #RBI #Foreigninvestments #bankingregulator #standguarantee #nonresidents #convertibledebentures
Posted on: Fri, 06 Sep 2013 02:35:33 +0000
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