The government has removed the redemption reserve requirement for issuance of debentures by non-banking financial companies, housing finance companies and listed firms, a move aimed at reducing cost for raising capital.
Under the companies law, these entities raising money had to create Debenture Redemption Reserve (DRR) and that requirement has now been done away with.
The corporate affairs ministry on Monday said the requirement for a DRR of 25 per cent of the value of outstanding debentures issued by listed companies, Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) has been removed.
The changes would be applicable for public issue as well as private placements.
In the case of unlisted companies, the DRR requirement has been reduced to 10 per cent from 25 per cent of the outstanding debentures.
“The measure has been taken by the government with a view to reducing the cost of the capital raised by companies through issue of debentures and is expected to significantly deepen the bond market,” the release said.
The ministry has amended the Companies (Share Capital & Debentures) Rules to effect the changes.
Source: Business Standard
