Govt Removes Requirement of Debenture Redemption Reserve Norm for listed companies, NBFCs

IANS 20 August 2019

Economy & Nation

The government on Monday removed the requirement of 'Debenture Redemption Reserve' (DRR) for listed companies, non-banking financial companies (NBFCs) and housing finance companies (HFCs).

A statement by the Corporate Affairs Ministry said that the decision has been taken in pursuance of the budget announcements for 2019-20 by Finance and Corporate Affairs Minister Nirmala Sitharaman and the government's objectives of providing greater "ease of doing business" to companies in the country, as part of its 100 Days Action Plan.

"The Ministry of Corporate Affairs has amended the Companies (Share Capital and Debentures) Rules by removing Debenture Redemption Reserve requirement for Listed Companies, NCFCs and HFCs," it said.

Through the amendments, the provisions relating to creation of DRR have been revised with the objective of "removing the requirement for creation of a DRR of 25 per cent of the value of outstanding debentures in respect of listed companies, NBFCs registered with the RBI and for HFCs registered with National Housing Bank (NHB) both for public issue as well as private placements," said the statement.

The amendment would also aims to reduce DRR for unlisted companies from the present level of 25 per cent to 10 per cent of the outstanding debentures.

Earlier, listed companies had to create a DRR for both public issue as well as private placement of debentures, while NBFCs and HFCs had to create DRR only when they opted for public issue of debentures.

"It (the latest amendment) is aimed at creating a level-playing field between NBFCs, HFCs and listed companies on the one hand and also between them and Banking Companies & All India Financial Institutions on the other, which are already exempted from DRR," it said.

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Comments

User

Ramesh Poapt

7 years ago

bad one indeed!

vikram chinmulgund

7 years ago

Debt without liability to pay - Awesome Idea of Chaiwalla. Modi govt. slogans / schemes have been gradually undoing all the reforms brought in by P.V. Narsimha rao + Manmohan Singh in the 90's. The effect on the economy is obvious now. India is now considering offering bonds internationally which is the same as begging other countries for money against an IOU. Instead of fixing the problem which means admitting policy errors the Modi govt. is just covering the issue with more paper money. First demonetization and now throw away the new currency into a black hole of debt without liability. Begging bowl to IMF is next.

Ashit Kothi

7 years ago

WHAT IS 'EASE OF DOING BUSINESS' - RECKLESS BORROWING WITHOUT ANY REPAYMENT INTENTION. IT IS MISPLACED STEP.

Ask Banking segment to pass on the benefit of reduction in rates to Corporate / Retail Borrowers. Bring down the actual (real) cost of capital. Delays in various permission, issue and renewal of various licenses, delay in resolving any financial disputes increase the cost of capital as resolution of issues take indefinate time.