The Ministry of Corporate Affairs on Monday amended the Compes Share Capital and Debentures Rule by removing debenture redemption reserve (DRR) requirement for listed compes, Housing Finance Compes (HFCs) and Non-Banking Finance Compes (NBFCs).
"The decision has been taken in pursuance of the Budget announcements for 2019-20 by Union Finance and Corporate Affairs Minister Nirmala Sitharaman and the government's objectives of providing greater 'Ease of Doing Business' to compes in the country, as part of its 100 Days Action Plan," a press release by the Press Information Bureau (PIB) reads.
Prior to these amendments, the listed compes, NBFCs registered with RBI and HFCs registered with the National Housing Bank (NHB) were required to create a DRR worth 25 per cent of the value of outstanding debentures for both public issue and private placements.
According to the release, there has also been a "reduction in DRR for unlisted compes from the present level of 25 per cent to 10 per cent of the outstanding debentures."
With this move, the government is planning to bring NBFCs, HFC and listed compes at par with the Banking compes and All India Financial Institutions.
"It is aimed at creating a level-playing field between NBFCs, HFCs and listed compes' on the one hand and also between them and Banking Compes and All India Financial Institutions on the other, which are already exempted from DRR," the release added.
"The measure has been taken by the government with a view to reducing the cost of the capital raised by compes through the issue of debentures and is expected to significantly deepen the bond market," it added.
However, as per the release, the DRR requirement for unlisted compes has not been completely removed to protect the interests of the investors.
( With inputs from ANI )