New SEBI Framework to boost Corporate Bond Market

SEBI has unveiled a new framework for consolidation in debt securities in a bid to deepen the corporate bond market.

Salient Facts

As per the new framework, liquidity in the secondary market for corporate bonds would be increased through the minimal number of ISINs (International Securities Identification Numbers). ISINs code has 12 characters that are primarily used for uniquely identifying securities like stocks, bonds warrants and commercial papers.

The SEBI has taken measures to minimise the number of ISINs in order to increase liquidity and to ensure that the issuer’s ability to raise funds through debt securities is not curtailed. Usually, the investors trade in corporate bonds which are freshly issued by a particular issuer. As a result, the outstanding securities of the same issuer become mostly illiquid. So, as per the new framework, an issuer will be allowed a maximum of 17 ISINs maturing per financial year. An entity will be permitted to issue both secured and unsecured non-convertible debentures. In addition, in a fiscal year, an entity would be permitted to issue up to 5 ISINs for structured debt instruments of a particular category.

However, as per SEBI, the restrictions placed by it does not apply to debt instruments that are being used for raising regulatory capital as well as for affordable housing and capital gains tax.

SEBI

SEBI is the statutory regulator for the securities market in India established in 1988. It was given statutory powers through the SEBI Act, 1992. SEBI’s headquarters is in Mumbai, Maharashtra. SEBI’s mandate is to protect the interests of investors in securities, promote the development of securities market and to regulate the securities market. The Key functions of SEBI are as follows: Regulating stock exchanges and other securities markets; Registering and regulating the working of intermediaries who are associated with securities markets in any manner; Registering and regulating the working of venture capital funds and collective investment schemes including mutual funds; promoting and regulating self-regulatory organizations and prohibiting fraudulent and unfair trade practices relating to securities markets.