While volatility in global markets have put offshore fund raising by Indian companies on pause for the past few weeks, there is another reason no one has hit the market, and that is a delay in obtaining loan registration number (LRN) from the Reserve Bank of India (RBI), investment bankers aware of the matter told FE. ECB guidelines mandate that any draw-down in respect of an ECB as well as payment of any fees/charges for raising an ECB should happen only after obtaining the LRN from RBI by filing Form 83 to the central bank. Even if an issuer prices a foreign currency bond, masala bond or an overseas loan, they cannot repatriate the funds until they have obtained an LRN from the RBI, bankers say. A company which priced its masala bonds recently has still not been able to repatriate the funds due to this issue, two investment bankers told FE. “This delay is an unusual phenomenon. I am not sure if this has happened anytime in the near past, if at all it happened,” said a foreign banker.
Investment bankers also pointed out that they got in touch with the central bank but have not received any clear response on the issue. “Till this gets resolved, it is unlikely that there would be any overseas bond issues from an Indian company. This is going to be an issue because you cannot settle the bonds. We have tried to get in touch with the RBI but they have not given us any reason,” another banker pointed out. An email sent to an RBI spokesperson seeking the central bank’s view remained unanswered till the time of going to press. Indeed, volatility in the global markets at the current juncture has been one of the prime reasons why most issuers are shying away from tapping the overseas debt market.
The 10-year US Treasury yield is near a four-year high of 2.9% ahead of the release of the minutes of the FOMC meeting and a large debt auction of $258 billion this week. However, even in this backdrop, there are some companies that are considering overseas issuances. Sources say that these companies have applied for LRNs but have not received them. “There are many firms that have applied and are waiting for the LRNs. We will have to wait and watch,” said a banker.