Capital Markets Singapore Client Alert June 2017 Masala Bonds: RBI Revises Norms on Minimum Maturity, All-in Cost and Permitted Investors The Reserve Bank of India (the “RBI”) established the framework for borrowing by Indian companies through the issuance of Indian Rupee ("INR") denominated, U.S. dollar ("USD") settled bonds overseas ("Masala Bonds") through its September 2015 circular, which has been further amended on 13 April 2016 and 16 February 2017 (together, the “Masala Bonds Framework”). The Masala Bonds Framework is also contained and summarised in paragraph 3 of the RBI’s January 2016 Master Direction on External Commercial Borrowings (the “ECB Master Direction”). Our initial client alert on the Masala Bonds framework is available here. Our subsequent client alert on the Masala Bonds framework is available here. On 7 June 2017, the RBI issued a circular amending the regulatory framework for Masala Bonds (the "June 2017 Amendment"). The June 2017 Amendment requires all eligible entities that wish to issue such bonds to approach the RBI’s Foreign Exchange Department in relation to any proposal to issue Masala Bonds. Set out below is a summary of the other key changes made pursuant to the June 2017 Amendment. Recognised investors Entities which are classified as a related party within the meaning of Ind-AS 24 will not be eligible anymore to invest in Masala Bonds. This effectively limits any intra-group transactions in relation to these instruments. Maturity period The minimum maturity period for Masala Bonds, which was earlier reduced to a period of three years from five years in order to increase the marketability of Masala Bonds, has been amended again. Pursuant to the June 2017 Amendment, the minimum maturity period for Masala Bonds up to an INR equivalent of USD 50 million in a financial year will be three years. The minimum maturity period for Masala Bonds above an INR equivalent of USD 50 million in a financial year will be five years. All-in-cost ceiling The all-in-cost ceiling for Masala Bonds was earlier required to be commensurate with prevailing market conditions. Rather than a prescriptive ceiling approach (as is the case with non-Rupee external commercial borrowings), such an approach was helpful in determining the pricing for these bonds. For more information, please contact: James Huang Principal +65 6434 2564 James.Huang @bakermckenzie.com Emmanuel Hadjidakis Principal +65 6434 2781 Emmanuel.Hadjidakis @bakermckenzie.com Pallavi Gopinath Aney Principal +65 6434 2762 Pallavi.Gopinath.Aney @bakermckenzie.com Prashanth Venkatesh Local Principal +65 6434 2600 Prashanth.Venkatesh @bakermckenzie.com Jitesh Shahani Senior Associate +65 6434 2731 Jitesh.Shahani @bakermckenzie.com Client Alert June 2017 Masala Bonds are now subject to an all-in-cost ceiling, which must be 300 basis points over the prevailing yield of Government of India securities of corresponding maturity. This client alert is provided for general information purposes only, is not intended to be exhaustive, comprehensive or authoritative and does not constitute legal advice. Baker McKenzie does not practice Indian law and the summaries of Indian laws or regulations contained herein are derived from discussions with Indian legal counsel. The various aspects of Masala Bonds discussed in this client alert can be developed in greater detail on request and we can further analyse issues specific to a proposed transaction, on a case by case basis. www.bakermckenzie.com Baker McKenzie Wong & Leow 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1 Singapore 018981 Tel: +65 6338 1888 Fax: +65 6337 5100 ©2017 Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.