SEBI said the debt segment would provide separate trading, reporting, membership, clearing and settlement rules
Mumbai: Continuing with its efforts to develop the country's corporate debt market, Securities and Exchange Board of India (SEBI) issued elaborate guidelines for setting up a separate debt segment on stock exchanges where entities like banks and pension funds can execute trades, reports PTI.
The decision to have separate debt segment on the bourses was taken at market regulator SEBI's board meeting last week.
SEBI said the debt segment would provide separate trading, reporting, membership, clearing and settlement rules.
Debt securities may be called debentures, bonds, deposits, notes or commercial paper depending on various factors including maturity periods.
In the proposed debt segment, trading would be from 0900 hours to 1700 hours.
"Institutions such as scheduled commercial banks, primary dealers, pension funds, provident funds, insurance companies, mutual funds... can trade on the debt segment either as clients of registered trading members or directly as trading member on proprietary basis only.
"Such institutions desirous of trading on own account only shall be given trading membership under SEBI (Stock Broker and Sub-Broker) Regulations, 1992 as proprietary trading member," SEBI said in a circular.
According to the regulator, the market for debt securities differs from equity markets in several ways such as risk, returns, liquidity, type of participants and method of trading.
"While publicly issued debt securities are listed, traded and settled in a manner similar to equity, privately placed debt is usually traded between institutional investors on 'over the counter' (OTC) basis. Such OTC transactions are mandatorily reported on reporting platforms at FIMMDA, BSE and NSE," SEBI said.
The regulator said an existing stock exchange or new bourse willing to set up debt segment is required to make an application with SEBI providing operational, regulatory and any other necessary details.
SEBI said minimum capital deposit required to be maintained by a stock broker for trading in the debt segment would up to Rs50 lakh.
"With the view to infuse liquidity in the market, market makers shall be permitted in the debt segment. Market making may be provided by merchant bankers, issuers through brokers or any other entity as may be specified," it said.
The debt segment has to list all the securities and debt instruments and has offer electronic, screen-based trading system.
As per SEBI, the trading facility for the bond market can make use of access methods such as internet and mobile trading. Further, the segment should have separate trading platforms for retail as well as institutional players.
With increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion
Mumbai: The Reserve Bank of India (RBI) has hiked foreign institutional investors (FII) investment limits in government securities (G-Secs) and corporate bonds by $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to bridging the current account deficit, reports PTI.
Further liberalising the norms, the three-year lock-in period for FIIs purchasing government securities (G-Secs) for the first time has been done away with, RBI said.
The sub-limit of $10 billion for investment by FIIs and long-term investors in G-Secs stands enhanced by $5 billion, it said.
The limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said.
With increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion.
The earlier FII investment limit in G-Secs was $20 billion and for corporate debt it was $45 billion, including sub-limit of $25 billion for infra bonds.
RBI further said: "Residual maturity condition shall not be applicable for the entire sub-limit (in GSecs)of $15 billion but such investments will not be allowed in short-term paper like Treasury Bills, as hitherto".
The overall FII limit of domestic debt is distributed through a host of categories across government, corporate and infrastructure debt.
Long-term investors include sovereign wealth funds, multilateral agencies, pension funds and foreign central banks.
Government, which is battling a high current account deficit (CAD) -- the gap between inflows and outflows of foreign funds -- is trying to attract more foreign funds into the country.
The CAD touched a record high of 5.4% in the July-September quarter of the current fiscal.
In order to check outflow of foreign currency, the government recently hiked import duty on gold and also took steps to encourage mutual funds park their gold in deposit schemes offered by banks.
As a measure of further relaxation, the RBI added that it has dispensed with the one year lock-in period on holding infrastructure bonds.
The CDR proposal involves a 10-year door-to-door back-ended repayment plan with a reduced interest rate, which effectively means a 3% savings on interest burden for financially troubled Suzlon
Mumbai: Wind energy major Suzlon said its lenders, comprising 19 banks led by State Bank of India (SBI), have approved its proposal to rejig Rs9,500 crore of domestic debt, providing a big relief to financially troubled company, reports PTI.
“The empowered group of corporate debt restructuring (CDR) cell comprising 19 lenders formally approved our CDR proposal to recast Rs9,500 crore of domestic debt. The package is effective from 1 October 2012 and does not include our foreign currency debt,” Suzlon said in a statement.
The Tulsi Tanti-promoted company further said, the CDR proposal involves a 10-year door-to-door back-ended repayment plan with a reduced interest rate, which effectively means a 3% savings on interest burden for the company.
The proposal also involves a two-year moratorium on principal and term-debt interest payments, apart from a fresh working capital loan of Rs1,800 crore, which will have a six-months interest moratorium, which is aimed at helping the company accelerate execution of its strong order book.
During the course of the two-year moratorium, interest worth Rs1,500 crore will be converted into equity, the company said.
The Pune-headquartered company further said that the package also includes promoters bringing in Rs250 crore of fresh equity, of which Rs62 crore was infused last December.
“This approval clearly underscores the fundamental viability of our business,” Kirti Vagadia, chief financial officer of the Suzlon Group.
SBI is the consortium leader and the CDR plan has been drafted by SBI Caps. SBI has a Rs3,500-crore exposure to the company.
Suzlon was looking at recasting Rs11,000 crore of its Rs14,568 crore domestic loans (as of the September quarter).
This debt is four times its equity. It sought the debt restructuring process during late October.
The other main lenders include IDBI Bank, Bank of Baroda, Axis Bank, Punjab National Bank, Indian Overseas Bank, Central Bank of India, Yes Bank, and State Bank of Bikaner & Jaipur, among others.