Inaugural address by Mr G Padmanabhan, Executive Director of the Reserve Bank of India, at the Authorised Dealers’ Conference, Agra, 30 November 2013
...........In the original FEMA regulations, it was provided that it was in order to issue a partially convertible debenture against foreign direct investment. In 2006–07, when external commercial borrowing was discouraged, companies responded with an obvious dodge: a partially convertible debenture with a nominal part slated to be converted to equity was used to camouflage a commercial borrowing. We responded by excluding a partially convertible debenture from the list of securities that can be issues against FDI and to be treated as a debt. I am afraid the game is not yet over because the vice of treating a partially convertible debenture as debt is that someday, when appropriate incentives are there, it can be used to camouflage an equity investment.......
No comments:
Post a Comment