In a bid to bring in more depth in the corporate bond market, Securities and Exchange Board of India (Sebi) has simplified the rating requirements and removed structural restrictions on the corporate bonds issuance. In a circular issued on Monday, Sebi said that the issuers will now need to obtain rating from only one credit agency instead from the earlier provision of two ratings from two different rating agencies for the public and rights issues of debt instruments. This has been done with a view to reduce the cost of issuances.
The regulator said, “In order to facilitate the issuance of below investment grade bonds to suit the risk or return appetite of investors, the stipulation that debt instruments issued through public or rights issues shall be of at least investment grade has been removed.” In a disclosure based regime, it should be left to the investors to decide whether or not to invest in a non-investment grade instrument, Sebi said.
Further, Sebi said that the structural restrictions on maturity, put or call option on conversion, which is currently in place have been done away with. This has been done in order to afford issuers with the desired flexibility in structuring of debt instruments, the regulator said.
Sebi has taken these steps to facilitate the development of a vibrant primary market for corporate bonds in India. The regulator has amended the provisions pertaining to issuances of corporate bonds under the Sebi (Disclosure and Investor Protection, DIP) Guidelines, 2000.
The regulator and stocks exchanges are working together in tandem with the Union government to bring depth in the debt market.
Earlier, the Bombay Stock Exchange (BSE) has started reporting the trades on the corporates debt market last year and a trading platform earlier this year.
The financial minister P Chidambaram has already stressed on the need to improve the health of the debt market.
