Budget

SEBI to push firms to tap bonds

File photo: The headquarters of the Securities and Exchange Board of India (SEBI) in Mumbai.

File photo: The headquarters of the Securities and Exchange Board of India (SEBI) in Mumbai.   | Photo Credit: Reuters

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The Securities and Exchange Board of India (SEBI) will soon consider creating a regulatory framework, making it compulsory for corporates to tap the bond market for a part of their capital requirement.

While presenting the Union Budget 2018-19, Finance Minister Arun Jaitley said while the Reserve Bank of India (RBI) had already moved in the direction, the capital market regulator would also take up this issue for listed companies.

“Reserve Bank of India has issued guidelines to nudge corporates to access bond market. SEBI will also consider mandating, beginning with large corporates, to meet about one-fourth of their financing needs from the bond market,” said Mr. Jaitley.

SEBI to push firms to tap bonds
 

Further, he also said that the all the regulators concerned would take necessary steps to permit bonds with ‘A’ rating to be made eligible for investment.

“Corporate bonds rated ‘BBB’ or equivalent are investment grade. In India, most regulators permit bonds with the ‘AA’ rating only as eligible for investment. It is now time to move from ‘AA’ to ‘A’ grade ratings. The government and concerned regulators will take necessary action,” said the Finance Minister.

“Most of the big corporations are already moving towards the bond markets to take advantage of the lower cost. Making it mandatory to raise one fourth of the total borrowing through bonds can push the supply side of the corporate bond market,” said Jimmy Patel, MD & CEO, Quantum AMC.

Interestingly, corporate bond market revival has been the subject of many committees and study papers but has failed to register a growth trajectory like that of the equity market or, for that matter, interest rate derivatives that is showing signs of activity.

SEBI already has a Corporate Bonds and Securitization Advisory Committee headed by Shyamala Gopinath, Former Deputy Goernor, RBI. The committee had been mandated to advise SEBI on issues related to the development of the corporate bond market and also the market for securitised instruments in India.

The committee, which has representations from the government, banks, mutual funds, rating agencies, stock exchanges and depositories, also advises SEBI on issues for addressing the operational and systemic risks in the segment.

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Printable version | Jan 21, 2020 8:59:49 PM | https://www.thehindu.com/business/budget/sebi-to-push-firms-to-tap-bonds/article22624367.ece

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