Investments by persons resident outside India in tax free, secured, redeemable, non-convertible bonds - RBI Instructions
REGULATION No. 6 (2) of Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 imposes restrictions on person resident in India who have borrowed in Rupees from a person resident outside India to the effect that such borrowed funds cannot be used for any investment, whether by way of capital or otherwise, in any company or partnership firm or proprietorship concern or any entity, whether incorporated or not, or for relending.
RBI has now decided to permit such resident entities / companies in India, authorised by the Government of India, to issue tax-free, secured, redeemable, non-convertible bonds in Rupees to persons resident outside India to use such borrowed funds for the following purposes:
(a) for on lending / re-lending to the infrastructure sector; and
(b) for keeping in fixed deposits with banks in India pending utilization by them for permissible end-uses.
Reserve Bank has since amended the Regulations accordingly through the Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment) Regulations , 2013, which have been notified, vide Notification No. FEMA.287/2013-RB dated September 17, 2013.