Structured Obligations
In order to enable corporates to hedge exchange rate risks and raise resources domestically, domestic rupee denominated structured obligations are permitted to be credit enhanced by international banks international financial institutions joint venture partners, subject to following conditions: (a) In the. event of default, foreign banks giving guarantee would make payment of defaulted amount of principal and interest after bringing in the equivalent amount of foreign exchange into the country. (b) FEMA clearance, if any, should be obtained from he RBl in advance of issuance; (c) Prior clearance for rupee bonds debenture issue should be obtained from the RBl/SEBI. (d) In.
the event f default, the default should be a foreign exchange equivalent of the principal and interest outstanding, calculated in rupee terms. (e) The inability of the Indian company in a post-default situation may be in rupees. or in forex, as envisaged initially in the contract document. . . (0 he guarantee fee commission charges and other incidental expenses to the Indian’ company should be in rupee terms only. The all-in-cest n this account should not exceed 3 per cent r annum in rupee terms. (g) In case of the proposals relating to sectors where conditions apply, clearances, for example, relating to the assignability licenses and so on, should be obtained in advance. , (h) Default interest, not exceeding 2′ per cent over the applicable rate, should.
be incorporated in the approval letter. n,addition to corporates, non-banking ‘finance companies (NBFCs) are also eligible to avail of the facility in compliance with the following additional conditions; namely. they should be registered with the RBI; should have earned ‘profit during the last three years and should have AA or equivalent rating from a, reputed credit rating agency. However, in case of a NBFC . where a credit enhancement guarantee haS been prescribed by its parent company on a nonrecourse 3Qd non-repatriable basis, the condition of a 3-year track record would not be applicable and the credit rating of A’ or equivalent would also be accepted.
