The Reserve Bank of India (RBI) has granted permission to Indian companies to issue non-convertible or redeemable preference shares or debentures to non-resident shareholders from their general reserves as bonus. This facility will also include the depositories that act as trustees for the ADR/GDR holders. The issue of preference shares (excluding non-convertible/redeemable preference shares) and convertible debentures (except optionally convertible or partially convertible debentures) would be subject to Foreign Direct Investment Scheme.
Why has the RBI allowed company to issue non-convertible debentures to non-resident Indians?
As per the notification issued by the RBI, the step has been taken with a view to rationalize and simplify the norms following references from some Indian companies to issue non-convertible or redeemable bonus preference shares or debentures to non-resident shareholders from the general reserve under a scheme of arrangement by a court, under the provisions of the Companies Act. Until now, RBI was granting permission for such issuances on a case-to-case basis.