RBI lets firms issue tax-free bonds to foreign resident

The Reserve Bank of India (RBI) has 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, fund raised has to be used for lending to the infrastructure sector.

Besides, the borrowed fund can be kept in fixed deposits with banks in India pending utilisation by them for permissible end-uses, the central bank said.

According to the current regulation, the central bank imposes restrictions on person 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.