The Reserve Bank of India (the “RBI”), by a circular issued on April 13, 2016 (A.P. (DIR Series) Circular No. 60), has notified certain key changes in relation to overseas issuance of Indian Rupee (“INR”) denominated bonds (popularly known as ‘Masala bonds’), by eligible Indian entities. 

This circular has been issued further to RBI circular dated September 29, 2015 on ‘Issuance of Rupee denominated bonds overseas’ and RBI Master Direction No. 5 dated January 1, 2016 on ‘External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers’, read with the RBI’s Fourth Bi-Monthly Monetary Policy Statement, 2015-16, issued on September 29, 2015.

Key Changes 

Certain key changes notified through A.P. (DIR Series) Circular No. 60 are briefly set out below:

  • Issuance of INR bonds overseas will be within the aggregate limit of foreign investment in corporate debt, currently fixed at US$ 51 billion and, in INR terms, at INR 2,443.23 billion (and not US$ 750 million). Proposals to borrow beyond INR 50 billion in a financial year require prior RBI approval.
  • The minimum maturity period for INR bonds issued overseas has been limited to three years (and not five years).
  • INR bonds issued overseas can only be issued in a country and can only be subscribed by a resident of a country: (a) that is a member of the Financial Action Task Force (“FATF”) or of an FATF-Style Regional Body; and (b) whose securities market regulator is an Appendix A Signatory to the International Organization of Securities Commission (“IOSCO”)’s Multilateral Memorandum of Understanding (“MoU”) or to a bilateral MoU with the Securities and Exchange Board of India (SEBI) for information sharing arrangements; and (c) is not identified in an FATF public statement as a jurisdiction having strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which countermeasures apply, or that has not made sufficient progress in addressing such deficiencies or not committed to an action plan developed with the FATF to address such deficiencies.

In this relation, the RBI has also notified certain procedural changes, briefly described below:

  • Issuers of INR bonds overseas are required to incorporate provisions in the transaction agreements and/or offer documents, so as to enable them to obtain the list of primary bondholders and provide the details to regulatory authorities in India as and when required and, further, to state that such INR bonds issued overseas can only be sold, transferred or offered as security overseas subject to compliance with aforesaid IOSCO / FATF jurisdictional requirements.
  • Inflows and outflows (principal only) on account of borrowing by issuance of INR bonds overseas is required to be reported on the same day to the RBI, through the borrowers’ Authorised Dealer Category-I banks, detailing actual drawdowns and repayments and quoting the related Loan Registration Number (“LRN”), in addition to the Form 83 and ECB-2 returns filed with the RBI as in the case of availment of External Commercial Borrowings (“ECB”) in general. 

Pipeline transactions where the LRN has already been obtained, and proposals where agreements have already been signed or offer documents already issued, are permitted to be concluded as per provisions notified earlier by the RBI. In all other overseas issuances of INR bonds, A.P. (DIR Series) Circular No. 60 dated April 13, 2016 is effective immediately.


This circular more closely aligns the regulatory frameworks for INR bonds issued in India under the Foreign Portfolio Investment (“FPI”) route and for INR bonds issued by permitted Indian entities overseas under the ECB route. Critically, the permitted maturity period for INR bonds issued in India under the FPI route (viz., three years) and for INR bonds issued by permitted Indian entities overseas under the ECB route (viz., previously five years) has now been brought in line, which may make Masala bond offerings more attractive to investors.