ARC Finance and Investments Ltd (ARCFIL) registered with the RBI under Section 45-IA of the RBI Act as a non-banking finance company (NBFC), has about ₹100 crore of debenture maturing in the current year which was issued

As per Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014, Debenture Redemption Reserve is not required for debentures issued by NBFCs registered with Reserve Bank of India under section 45- IA of the RBI Act, 1934 for both public as well as privately placed debentures. The company shall create a Debenture Redemption Reserve for the purpose of redemption of debentures, in accordance with the conditions given below : (a) the Debenture Redemption Reserve shall be created out of the profits of the company available for payment of dividend; (b) the company shall create Debenture Redemption Reserve (DRR) in accordance with conditions: - (i) No DRR is required for debentures issued by All India Financial Institutions (AIFIS) regulated by Reserve Bank of India and Banking Companies for both public as well as privately placed debentures. For other Financial Institutions (Fls) within the meaning of clause (72) of section 2 of the Companies Act, 2013, DRR will be as applicable to NBFCs registered with RBI. (earlier to 16.8.2019) (ii) For NBFCs registered with the RBI under Section 45-1A of the RBI Act, 1934, and for housing finance companies registered with the national housing bank, the DRR requirement has been dispensed w.e.f 16th Aug 2019. Accordingly, no Debenture Redemption Reserve is required to be created by ARCFIL in the given case. The above exemptions also apply to listed companies if the money was generated by privately placed debentures. Hence under both circumstances DRR is not required to be created.