The Reserve Bank had in its busy-season credit policy allowed corporates general permission to local corporates to issue NCDs to NRIs, PIOs, OCBs by way of public issue on a repatriable basis. Such issuances will not require a prior Reserve Bank of India clearance.

In a circular to all authorised dealers of foreign exchange, the Reserve Bank said the rate of interest on the NCDs cannot exceed 300 basis points over the State Bank's PLR.

Subscription by NRIs/PIOs/OCBs to the NCD issuances could be through a public offering and be received by inward remittance from abroad through normal banking channels or by debit to the NRE/FCNR/NRO/NRSR accounts of these entities with an authorised dealer. The principal amount representing the investment is non-repatriable. If the investment is made out of funds held in NRSR account, the principal as well as interest earned are non-repatriable.

The Reserve Bank has further said the company raising funds through NCDs should not be engaged in agricultural, plantation, real estate business, trading in transferable development rights (TDRs) or act as a nidhi/chit fund company.

In its October '99 credit policy, the Reserve Bank had proposed granting of general permission to the Indian companies to issue NCDs to non-residents. The central bank has also proposed allowing authorised dealers to grant rupee loans and overdrafts in the country to non-residents against the security of shares, securities, debentures or immovable properties held by them in India for purposes other than investment

The Reserve Bank has delegated powers to authorised dealers to allow portfolio investment by non-residents in shares or debentures. Currently, non-residents have to seek Reserve Bank approval for a period of five years, renewable by designated banks.