Debenture
Redemption Reserve (DRR) - Clarification
Circular No.
04/2013, No.11/02/2012-CL-V (A), dated 11.02.2013
To
All Regional Directors
All Registrars of Companies
All Chambers of Commerce
The Reserve Bank of India
The Securities
and Exchange Board of India
The requirements
with regard to 'adequacy' of debenture redemption reserve (DRR) have been
clarified by this Ministry vide General Circular No. 9/2002 dated 18/04/2002.
2. The matter
with regard to need for review of limits indicated in such Circular has been
examined by this Ministry in consultation with various stakeholders including
relevant regulators. Keeping in view such consultations and the need for
development of corporate bonds/debentures, it has been decided to clarify on
adequacy of DRR and other related matters as under:-
(i) No DRR is required for debentures
issued by All India Financial Institutions (AIFIs) regulated by Reserve Bank of
India and Banking Companies for both public as well as privately placed debentures.
For other Financial Institutions {FIs) within the meaning of Section 4A of the
Companies Act, 1956, DRR will be as applicable to NBFCs registered with RBI.
(ii) For NBFCs registered with the RBI
under Section 45-IA of the RBI (Amendment) Act, 1997, 'the adequacy' of DRR
will be 25% of the value of debentures issued through public issue as per
present SEBI (Issue and Listing of Debt Securities) Regulations, 2008, and no
DRR is required in the case of privately placed debentures.
(iii) For other companies including
manufacturing and infrastructure companies, the adequacy of DRR will be 25% of the
value of debentures issued through public issue as per present SEBI (Issue and
Listing of Debt Securities), Regulations 2008 and also 25% DRR is required in the
case of privately placed debentures by listed companies. For unlisted companies
issuing debentures on private placement basis, the DRR will be 25% of the Value
of debentures.
(iv) Every company required to
create/maintain DRR shall before the 30th day of April of each year,
deposit or invest, as the case may be, a sum which shall not be less than
fifteen percent of the amount of its debentures maturing during the year ending
on the 31st day of March next following in any one or more of the
following methods, namely:
(a)
in
deposits with any scheduled bank, free from charge or lien;
(b)
in
unencumbered securities of the Central Government or of any State Government;
(c)
in
unencumbered securities mentioned in clauses (a) to (d) and (ee) of section 20
of the Indian Trusts Act, 1882;
(d)
in
unencumbered bonds issued by any other company which is notified under clause
(f) of section 20 of the Indian Trusts Act, 1882;
(v) The amount deposited or invested, as
the case may be, above shall not be utilized for any purpose other than for the
repayment of debentures maturing during the year referred to above, provided that
the amount remaining deposited or invested, as the case may be, shall not at
any time fall below 15 per cent of the amount of debentures maturing during the
31st day of March of that year.
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