RBI limits overseas debt structures

Author: Ashley Lee | Published: 3 Dec 2014

The Reserve Bank of India (RBI) has limited structures available to Indian high-yield issuers.

A November 25 notification clarified that Indian companies cannot issue any direct or indirect liability or offer security in any form for such borrowings by their overseas subsidiaries or holding companies. The move may negatively affect Greenko’s recent sub-investment grade issuance.

Indian high yield has become increasingly popular in the past few months as domestic banks tighten lending. While subsidiaries of well-known names such as Reliance and Tata are familiar issuers in the market, more Indian corporates have recently shown appetite for the asset class.

Some issuers have used innovative structures to bring investors closer to Indian credits. There has never been a default in Indian high-yield – although foreign currency convertible bond restructures...