Skip to main content

Sebi Plans ‘On Tap’ Bond Market

By
Market Regulator likely to let cos use stock exchanges to sell bonds directly to investors, including retail investors, any time and as many times during a financial year, after filing a single prospectus Sugata Ghosh & Reena Zachariah ‘Bond tap’, which gives corporates the flexibility to time the market, prune cost, and dramatically cut down on paperwork for raising money, will soon be a reality in India.
Capital market regulator Sebi is preparing the ground to allow ‘on tap public issue of bonds’ — a mechanism that will let corporates use stock exchanges to sell bonds directly to investors, including retail investors, any time and as many times during a financial year, after filing a single prospectus. “After filing the tap bond issue prospectus, a corporate can decide when to enter the market. It can be multiple times during a financial year depending on the fund need and market appetite... as the name suggests, it’s turning the tap on or off. Such issuances could be a cheaper, and certainly a far quicker way to raise debt capital,” a person aware of the plan told ET.
“It’s like a secondary sale of a primary issuance, similar to an offer for sale in PSU divestments. The stock exchange platform would be used to invite investors,” he said. According to a Sebi official, the regulator is exploring the basic framework for ‘on tap public issue’ and may soon invite feedback from market participants on the subject. On tap issues would offer greater leeway that shelf-prospectus which currently allows corporates to issue bonds by using the same document multiple times. In ‘tap’, unlike a ‘shelf ’, a string of formalities like dealing with the registrar, merchant banker, or issuing new advertisements and application forms can be done away with. On tap market, which thrives in financial centres like London, would particularly benefit certain sectors like non-depositing taking non-banking finance companies which are regular issuers, said Kaushik Mukherjee, partner at the law firm Shardul Amarchand Mangaldas. “On tap market can also benefit small issuers who otherwise find the cost of fund raising prohibitive. It’s a step towards a deeper bond market,” said Rajesh Gandhi, Partner, Deloitte.

NEW CURBS HURT INFLOW 
 
The idea is being discussed at a point when the bond market is grappling with conflicting regulatory moves. On one hand, the Securities and Exchange Board of India recently halved the listing time for corporate bonds to six days and introduced the mechanism where funds are debited from investors’ accounts only after allotment of securities. On the other hand, few months ago, the Reserve Bank of India brought in fresh investment restrictions — which are aimed at curbing concentration of investments and possible round-tripping of money stashed abroad in the run-up to the elections. Besides, rising US bond yields, the new rules are believed to have contributed to the recent bond selloffs by foreign portfolio investors.

The Economic Times, 27th August 2018

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more