Raising Money through Private Placement of Non-Convertible Debentures (NCDs)
by NBFCs
Non-Banking Financial Companies (NBFCs) used to raise money through issuance of non-convertible debentures
(NCDs) without any restrictions. This reflected their inadequate resource planning and resulted in higher
transaction cost. With an intent to regulate the privately placed issues of debentures by NBFCs and to ensure
minimum compliances, RBI has stipulated the guidelines to formulate a Board policy for resource planning and
periodicity. Accordingly, the issuance of private placement of NCDs shall be in two separate categories:
a) Maximum subscription of less than Rs. 1 crore (Category A)
b) Minimum subscription of Rs. 1 crore (Category B)
Parameters
Minimum
subscription per
Investor
Limit of
subscribers
Initial Guidelines
Initial Rs. 25 lakh and in
multiples of Rs.10 lakh
thereafter
49
Revised Guidelines
Rs. 20,000
Category A: 200
Category B: No limit
Category A: Mandatory
Category B:Optional
Security creation
Mandatory, except in case
of subordinated debt
Meaning of
Private Placement
Non-public offering of
NCDs by NBFCs to such
number
of
select
subscribers and such
subscription amounts, as
may be specified by the
Reserve Bank from time to
time
No revision in the aforesaid
explanation
Amount to be
secured
Amount of Debentures
Amount of Debentures
By the mortgage of any
immovable property of
the company; or by any
other asset
Funds can be deployed
only for own balance
sheet and not to facilitate
resource requests of
group entities / parent
company / associates.
By the mortgage of any
immovable property of the
company; or by any other
asset
Funds can be deployed only
for own balance sheet and
not to facilitate resource
requests of group entities /
parent
company
/
associates. (Not applicable
Nature of Security
to be created
Restrictions on
deployment of
funds
Companies Act, 2013
Rs. 20,000
200
Mandatory
Any offer of securities or
invitation to subscribe
securities to a select group
of persons by a company
(other than by way of public
offer) through issue of a
private placement offer
letter and which satisfies
the conditions specified.
Amount of Debentures and
interest
A charge or mortgage may
be created on any movable
property of the company.
No such restriction specified
Loan against
security of
debentures issued.
Applicability to
Tax exempt Bonds
(Not applicable to Core
Investment Companies)
An NBFC shall not extend
loans against the security
of its own debentures
(issued either by way of
private placement or
public issue).
No exemption from the
above guidelines.
to
Core
Companies)
Investment
NBFC shall not extend loans
against the security of its
own debentures (issued
either by way of private
placement or public issue)
No such restriction
Exempted
guidelines.
No exemption from the
above guidelines.
from
above