As you are aware, last two years (1998-99 and 1999-2000) have witnessed a number of developments which had a bearing, either directly or indirectly, on the resource raising aspects of the all India Financial Institutions ( FIs). They include, inter alia, progressive deregulation, introduction of IRS/ FRA, introduction of Asset-Liability Management (ALM) system, apparent shift in investors preference towards short-term instruments, etc. These developments have necessitated the review of extant guidelines relating to raising of resources by FIs. Accordingly the following modifications are being prescribed with immediate effect:

2. FIs are not required to seek Reserve Bank’s, issue-wise prior approval/ registration for raising of resources by way of issue of bonds (both public issue and private placement) subject to the fulfillment of the following conditions :

1. The minimum maturity of the bond should be 3 years ;
2. In respect of bonds having call/ put or both options, the same should not be exercisable before the expiry of one year from the date of issue of bonds ;
3. The YTM offered, at the time of issue of bonds, should not exceed 200 basis points above the YTM on the Government of India securities of equal residual maturities. The effective YTM on instruments having call/ put options should also satisfy this requirement ;
4. No ‘Exit’ option on the bonds will be offered before the end of one year, from the date of issue.

3. The outstandings of total resources mobilised at any point of time by an individual FI including funds mobilised under the ‘umbrella limit’ as prescribed by the Reserve Bank should not exceed 10 times its net owned funds (NOF) as per the latest audited balance sheet.
4. The limit fixed for raising resources is only an enabling provision, FIs are advised to arrive at their requirements of resources along with maturity structure and the interest rate offered thereon on a realistic basis, derived inter alia, from a sound system of ALM / Risk Management.
5. In case of floating rate bonds, FIs should seek prior approval from Reserve Bank, in regard to ‘reference rate’ selected and the methods of floating rate determination. The same is not required for subsequent individual issues so long as the underlying reference rate and method of floating rate determination remain unchanged.
6. FIs should take note to comply with the prudential requirements of other regulatory authorities such as SEBI, etc. as hitherto.
7. FIs are required to furnish monthly statements giving details on the resources raised as per the Annexure I and II enclosed herewith. The statements as at the end of a month are required to be furnished on or before the 10^th day of the following month. The details in respect of public issue of bonds are to be incorporated in the statement for the month during which the respective issue is closed.

The statements are to be addressed to the Chief General Manager, Financial Institutions Division, Department of Banking Supervision, Reserve Bank of India, The Arcade, Tower 6, World Trade Center, Cuffe Parade, Mumbai 400 005. Fax No 218 35 79.

8. These guidelines will be reviewed in March 2001 in the light of actual experience.

9. Please acknowledge receipt.

Yours faithfully,

Sd/-
(K.C.Bandyopadhyay)
Chief General Manager

Reporting Institution :
Report for the month ended :
Date of Report :
Overall Borrowing limit (10 times of NOF) : Rs. ………… …crore.
NOF as per the Audited Balance Sheet dated ..……..: Rs………………crore
Amount of Borrowing outstanding
as at the end of the month……….: Rs……………crore

Total amount raised during the month Rs…………..crore and Cumulative amount raised during the year (April –March) Rs.……….crore.

@ only the issue that has already been completed to be included.

# the date of issue open for public subscription / private placement to be mentioned.