Subject: Requirement of Debenture Redemption Reserve
Facts: 1. Ours is a domestic limited company 2. We have issued secured NCDs 3. The proceeds recd. by issuing NCDs have been invested in Security Receipt 4. The Security Receipts have been mortgaged to the debenture holders
Question: Considering the above facts, please suggest us whether there is any requirement of creating DRR in the books of accounts.
06 June 2022
Applicability of Debenture Redemption Reserve (DRR) All companies need to maintain a DRR except for the following: –
All India financial institutions: – The companies which are doing business under the supervision of the RBI like Export, Import Bank of India, Small Industries Development Bank of India, and National Housing Bank etc. Housing finance companies: – No need to maintain the DRR for the company registered with the Housing Finance Companies. Non-banking financial companies: – No need to maintain the DRR for the registered under Section 45-IA of the RBI Act, 1934. All scheduled banks: – The scheduled bank mentioned in the second schedule of the Reserve Bank of India Act, 1934 shall waive to maintain the DRR. Listed companies: – A company listed on one of the two stock exchanges, either the NSE or the BSE. The main purpose of these relaxations was introduced by the MCA for the reduction of the cost of borrowings incurred by companies.
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