SEBI Approves Corporate Debt Market Backstop Fund
Sebi said that it had approved a fund to backstop the corporate debt market by purchasing illiquid and investment grade debt paper. This will boost investor confidence in the corporate bond market while also increasing secondary market liquidity.
According to sources, India is establishing a fund worth Rs 330 billion ($4 billion) to provide liquidity to its corporate debt market during periods of stress, thereby reducing panic selling and alleviating redemption pressures.
Finance Minister Nirmala Sitharaman announced last year that the government had accepted the SEBI's proposal for the fund, but she did not provide any further details.
Based on a guarantee provided by National Credit Guarantee Trust Company (NCGTC), the Corporate Debt Market Development Fund (CDMDF) may raise funds to purchase corporate debt securities during market disruption.
"Access to the fund for selling securities during market dislocation shall be limited to specified mutual fund schemes in proportion to mutual fund contributions," SEBI stated.
SEBI has also decided to extend the compliance period for Large Corporates to raise 25% of their incremental borrowings through the debt market to a contiguous block of three years, rather than the current two years.
In addition, based on feedback from the industry, SEBI has decided to extend the 'comply or explain' period for High Value Debt Listed Entities (HVDLEs) in terms of corporate governance norms until March 31, 2024.