Reserve Bank on Tuesday allowed Indian entities to issue tax-free bonds to overseas residents for investment in infrastructure sector.
“On a review, it has been decided to permit such resident entities/companies in India, authorised by the Government of India, to issue tax-free, secured, redeemable, non-convertible bonds in rupees to persons resident outside India...,” RBI said in a notification.
However, it said, funds raised should be used for lending to the infrastructure sector.
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Besides, the borrowed funds can be kept in fixed deposits with banks in India pending utilisation by them for permissible end-uses, it said.
As per the current regulation, the central bank imposes restrictions on persons resident in India who have borrowed in rupees from a person resident outside India to the effect that such borrowed funds cannot be used for any investment.