RBI says no debt-flows under FDI Route

Mumbai, June 9 (UNI) In a bid to cap debt-flows under Foreign Direct Investment (FDI) route, the Reserve Bank has said only those financial instruments which are fully and mandatorily convertible into equities in a time bound manner will come under the FDI policy.

In a notification issued today, RBI has pointed out that some Indian companies are raising funds under the FDI route in form of optionally and Partially Convertible debentures, which circumvents the framework in place to regulate debt flows into the country.

''Issuance of such instruments is against both the letter and spirit of the FDI policy, which is aimed essentially to attract investments in the nature of equity capital and not surrogate debt instruments.'',RBI said in the notification.

However, companies which have already received funds from abroad for issue of partially or optionally convertible instruments on or before June 7 can issue such instruments, the notification said.

UNI