Sebi on Wednesday decided to set up a corporate debt market development fund in the form of an AIF with an initial corpus of Rs 3,000 crore to act as a backstop facility for purchase of investment grade corporate debt securities during times of stress.The move is aimed at instilling confidence amongst the participants in the corporate bond market and to generally enhance secondary market liquidity.
“The proposed Corporate Debt Market Development Fund (CDMDF) will have an initial corpus of Rs 3,000 crore contributed by mutual funds,” Sebi Chairperson Madhabi Puri Buch told reporters after the board meeting here.Further, she said the government has allowed a 10x usage of this corpus to be availed taking the available fund to Rs 33,000 crore and this additional corpus is also guaranteed by the central credit guarantee corporation.
CDMDF, based on a guarantee to be provided by National Credit Guarantee Trust Company (NCGTC) may raise funds, for purchase of corporate debt securities during market dislocation. Further, Sebi board approved amendments to mutual fund rules to provide for enablement of contribution by the specified debt- oriented mutual fund schemes and asset management companies towards building the initial corpus of the new fund.
Sebi said that access to the fund for selling securities during market dislocation will be to specified mutual fund schemes in proportion to the contribution made to the fund at a mutual fund level.The board also cleared the framework for triggering of corporate debt market development fund’s asset purchases during market dislocation.