Skip to main content

Sebi issues new framework to deepen corporate bond market


Liquidity in secondary market for corporate bonds will be increased by minimal number of ISINs
Regulator Sebi on Friday put in place a new framework for consolidation in debt securities as part of its efforts to deepen the corporate bond market.
Liquidity in the secondary market for corporate bonds will be increased by way of minimal number of ISINs (International Securities Identification Numbers).
ISINs code, which has 12 characters, is used for uniquely identifying securities like stocks, bonds warrants and commercial papers.
Generally, investors trade in corporate bonds that are freshly issued by a particular issuer. As a result, the outstanding securities of the same issuer become mostly illiquid.
In order to increase liquidity as well as ensure that an issuer's ability to raise funds through debt securities is not curtailed, Sebi has focused on minimising the number of ISINs.
Under the new framework, an issuer will be permitted a maximum of 17 ISINs maturing per financial year, the Securities and Exchange Board of India (Sebi) said in a circular.
A maximum of 12 ISINs maturing per financial year will be allowed only for plain vanilla debt securities. Within the limit of 12, an entity can issue both secured and unsecured non-convertible debentures while no separate category of ISINs will be provided to them.
Furthermore, an entity can issue up to five ISINs every fiscal "for structured debt instruments of a particular category".
Sebi said these restrictions will not be applicable to debt instruments that are used for raising regulatory capital and affordable housing as well as capital gains tax bonds.
To address the issue of bunching of liabilities, the regulator said the issuer can as a one-time exercise make a choice of having bullet maturity payment or make staggered payment of the maturity proceeds within a particular financial year.
The watchdog also said issuer would have a time period of six months to make an enabling provision in its Articles of Association to carry out consolidation and re-issuance of debt securities.
Also, an issuer would have to submit a statement to the stock exchange where its debt securities are listed, as well as to the depository containing data about.
ISIN number, issuance as well as maturity date and coupon rate among others within 15 working days.Besides, stock exchange would have to upload the same on its website as well as the Integrated trade Repository for corporate bonds.
Trading of corporate bonds in the secondary market has gone up in recent years and stood at Rs 14.7 lakh crore in the last financial year. The amount was just Rs 1.48 lakh crore in 2008-09.However, liquidity in the secondary market for these bonds has not picked up much, especially in comparison to primary market issuances.
With more entities tapping the route for mopping up funds, private placement of corporate bonds rose to Rs 6.4 lakh crore in 2016-17 whereas the same was at Rs 1.18 lakh crore in 2007-08. 
Business Standard New Delhi, 01st july 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…