SEBI eases norms for large corporates tapping debt market
Mumbai, September 21, 2023 at 10:12 PM. |
Raises threshold for defining large corporates, removes penalty, provides incentives
The Securities and Exchange Board of India (SEBI) has provided for a number of relaxations to large corporates (LCs) for meeting their financing needs from the debt market.
The regulator had mandated LCs to meet 25 per cent of their financing needs from the debt market, with an aim of deepening the corporate bond market in India. The move would also aid investors such as insurers, pension and provident funds which are required to invest a particular percentage of their incremental receipts in corporate bonds and could be hurt by lack of supply of issuances.
However, SEBI had found that about a third of the identified LCs did not raise the minimum 25 per cent of their incremental borrowing through issuance of debt securities in FY21-22.
Tapping the debt market, however, could be costlier than raising funds from banks and financial institutions. Taking the feedback of corporates into account on the challenges faced, the SEBI board on Thursday decided to raise the monetary threshold for defining LCs. This will effectively will reduce the number of entities qualifying as LCs.
While the SEBI release did not specify the quantum of the threshold, a consultation paper last month had proposed to raise the threshold for the outstanding long-term borrowings to at least ₹500 crore from the current ₹100 crore for identifying any entity as LCs.
The SEBI board has proposed removing the penalty on LCs which are not able to raise a certain percentage of incremental borrowing from the debt market. At present, a monetary penalty of 0.2 per cent of the shortfall in the borrowed amount at the end of three years is to be levied.
Additionally, SEBI will provide incentives and moderated disincentives for corporates to raise money from the debt market.
“With the view to facilitate ease of compliance and ease of doing business, the Board also decided to retain the requirement that compliance with the framework will be met over a contiguous block of three years,” SEBI said in its release.
SEBI, on Thursday, also extended the timeline for compliance with enhanced qualification and experience requirements for Investment Advisers by two years to September 30, 2025.
The Board gave its nod to streamline the framework for credit of unclaimed amounts of investors in listed entities other than companies, REITS and InvITs to the Investor Protection and Education Fund (IPEF).
A regulatory framework for segregation of unclaimed amounts of investors in the IPEF will be created to facilitate utilisation and processing of such amounts in the manner prescribed by the Board.
[The Hindu Business Line]