Central government enlists Debt and Non-debt instruments under FEMA


The Ministry of Finance in its notification dated 16th October 2019, has determined certain instruments as debt instruments and non-debt instruments.

The following instruments may be called as debt instruments, namely:

  1. Government bonds; 
  2. corporate bonds; 
  3. all tranches of securitisation structure which are not equity tranche; 
  4. borrowings by Indian firms through loans; 
  5. Depository receipts whose underlying securities are debt securities.

The followings instruments may be considered as non-debt instruments, namely:

  1. all investments in equity in incorporated entities (public, private, listed and unlisted); 
  2. capital participation in Limited Liability Partnerships (LLPs); 
  3. all instruments of investment as recognized in the FDI policy as notified from time to time; 
  4. investment in units of Alternative Investment Funds (AIFs) and Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InVITs); 
  5. investment in units of mutual funds and Exchange-Traded Fund (ETFs) which invest more than fifty per cent in equity; 
  6. the junior-most layer (i.e. equity tranche) of securitisation structure; 
  7. acquisition, sale or dealing directly in immovable property; 
  8. contribution to trusts; 
  9. Depository receipts issued against equity instruments.

All other instruments except those enlisted above shall be deemed as debt instruments. The notification eliminates all ambiguity and provides an exclusive list of non-debt instruments.

Click here to read notification.

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