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The Reserve Bank of India (RBI) has issued directions for the agencies dealing in securities. These directions would come into effect from August 2, 2010 & would apply to Non Convertible Debentures issued by Corporates.

For the purpose of these directions a Non Convertible Debenture would include the Debentures issued with the maturity date up to one year through Private Placement.

Appointment of Debenture Trustee:

As per these RBI directions every Company issuing such NCDs should appoint a qualified Debenture Trustee (DT). A qualified DT is any entity registered with Securities & Exchange Board of India (SEBI) under SEBI (Debenture Trustees) Regulations, 1993. The DT should comply with the directions issued for Issuance of NCDs with effect from August, 2 2010. Under these directions, RBI may ask for any information as required from time to time & the DT is under obligation to provide the same.

Who Can Invest in NCDs:

As per these directions following types of Investors are allowed to invest in NCDs:

· Any Individuals

· Banks

· Primary Dealers

· Corporate bodies

· Insurance Companies

· Mutual Funds incorporated in India

· Unincorporated entities

· Non Resident Indians (NRIs)

· Foreign Institutional Investors (FIIs, Subject to such limits as prescribed by SEBI)

The Companies issuing Non Convertible Debentures with a maturity period of upto one year should follow the Disclosure Document as prescribed by the Fixed Income

Money Market and Derivatives Association of India (FIMMDA).

Eligibility for issuing Non Convertible Debentures:

A Company can issue NCDs in it fulfills following conditions:

· The tangible Net Worth of the Company as per the latest audited Balance Sheet should be at least INR

4crore;

· The borrower account of the issuing Company in the books of the financing banks should be classified as a standard asset ( and not a Non Performing Asset)

· The issuing Company has been sanctioned a working Capital limit or tern loan by any bank or financial institution in India.

· The issuing Company should obtain a credit rating from credit rating agencies & the credit rating should be minimum P-2 of CRISIL or equivalent credit rating by other rating agencies

Conditions for Maturity Date of the NCD:

· The maturity date of the NCD should not be of less than 90 days from the date of issue

· The exercise dates of any Options issued with NCDs being an underlying should not fall within the 90 days of the issue of the NCD.