Ref DBS.FID No. 09.01.02/ 1999-2000

April 28, 2000

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 :

3. The total resources mobilised 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.
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, World Trade Center, Cuffe Parade, Mumbai 400 005. Fax No 218 35 79.

8. Please acknowledge the receipt.

Yours faithfully,

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

DO. DBS.FID No. H- 221-229 / 09.01.02 / 1999-2000

May 4, 2000

May I invite your reference to paragraph 65 of the statement on ‘Monetary and Credit Policy for the year 2000-2001’ enclosed to the Governor’s Circular MPD.BC No 196/ 07.01.279/ 1999-2000 dated April 27, 2000.

It was stated in the above mentioned paragraph that the guidelines relating to raising of resources through issue of bonds would be issued after further consultation with FIs. Accordingly, a copy of the draft guidelines pertaining to resources raising through bond issues by FIs, subject to overall limit fixed in terms of Net Owned Funds, is enclosed herewith.

It would be highly appreciated if you could kindly arrange to send your comments/ suggestions on the draft guidelines within 7 days.

Yours sincerely,

Sd/-

Enclrs: As Above