By Suvashree Choudhury
MUMBAI (Reuters) - The Reserve Bank of India on Wednesday tightened rules for Indian companies raising rupee-denominated bonds, also known as masala bonds, in a move aimed at closer oversight of a nascent market and getting long-term investors.
The RBI said masala bonds must have a minimum maturity of three years for issuances of up to $50 million. Sales above that amount would need to have maturities of five years or above.
It also set an all-in-cost ceiling of 300 basis points above a similar maturity government bond for masala bond issuances.
The RBI said it was changing the rules for masala bonds "with a view to harmonize" the present regulations on external commercial borrowings. It did not elaborate any further.
India has been keen to spur the sales of rupee-denominated bonds overseas, but the RBI has been cautious about domestic companies raising funds abroad because of worries about having excessive debts owed to overseas investors.
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Traders said these RBI rules would most likely impact lower-rated issuers, as they will now have less flexibility while issuing masala bonds.
"This is a new market, one needs to nurture the market with soft hands," said a corporate bond dealer at a foreign bank.
"Let the foreign investor decide at what rate and what maturity he wants to buy the rupee bond."
India has seen a handful of issuances since the country allowed masala bonds in 2015, including from Housing Development Finance Corp, Adani Transmission as well as from a few state-run companies.
(Editing by Rafael Nam and Sherry Jacob-Phillips)
Disclaimer: No Business Standard Journalist was involved in creation of this content
