What changed
RBI observed that certain NBFCs raised funds via private placement of NCDs with maturity less than 90 days, which contravenes the Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010. The central bank has now explicitly reminded all NBFCs that NCDs with original maturity up to one year fall under that 2010 framework and must be issued in full compliance.
What it means for you
NBFCs can no longer use sub-90-day NCDs as a loophole to bypass the 2010 Directions. Lenders relying on such short-term instruments for liquidity management will need to restructure their funding mix. This reinforces RBI's intent to bring all short-term NCD issuance under a uniform regulatory umbrella, potentially increasing compliance costs for smaller NBFCs.
What you must do
- Review all outstanding NCDs with original maturity under one year to ensure they comply with the 2010 Directions.
- Immediately stop issuing NCDs with maturity less than 90 days via private placement unless explicitly permitted.
- Update internal compliance checklists to flag any NCD issuance with maturity up to one year for pre-approval under the 2010 framework.
- Train treasury and legal teams on the specific requirements of the 2010 NCD Directions.
Who it affects
All NBFCs including RNBCs, Treasury departments of NBFCs, Compliance officers at NBFCs, Debt capital market teams arranging NCD private placements
Does this circular ban all NCDs with maturity below 90 days?
The circular does not impose a blanket ban but states that issuing NCDs with maturity less than 90 days via private placement violates the 2010 Directions. NBFCs must follow those Directions for any NCD with original maturity up to one year.
What are the 2010 NCD Directions that NBFCs must follow?
The circular refers to the Issuance of Non-Convertible Debentures (Reserve Bank) Directions, 2010 dated June 23, 2010, issued by RBI's Internal Debt Management Department. NBFCs should refer to that document for detailed compliance requirements.
Are RNBCs also covered by this circular?
Yes, the circular is addressed to all NBFCs including RNBCs (Residuary Non-Banking Companies), so the same compliance expectations apply to them.