Debt Datta

7/29/2019 Debt Datta

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DevelopmentsintheCorporateBondsandSecuritizationMarketsAnUpdate(asonFebruary24,2012)

In December 2005, the High Level Expert Committee on Corporate Bonds and

Securitization submitted its report giving a plethora of recommendations for thedevelopmentofthecorporatebondandsecuritizationmarketsinIndia.TheGovernment

hadsetupthiscommitteeto look into legal,regulatory,taxandmarketdesign issues in

the development of the corporate bond and securitization markets. Implementation of

the recommendations warrantted coordinated action by Government, Reserve Bank of

India(RBI)andSecuritiesExchangeBoardofIndia(SEBI).

InFebruary2006,FinanceMinister,inhisBudgetspeechof200607,announcedthatthe

Governmenthasaccepted therecommendationsoftheReportoftheHighLevelExpert

Committee on Corporate Bonds and Securitization and that steps would be taken to

createasingle,

unified

exchange

traded

market

for

corporate

bonds.

InMarch2006,Chairman,SEBIconstitutedan internalCommitteetoprepareanaction

planforthepurposeof implementationoftheBudgetproposalsondevelopmentofthe

corporatebondmarketinIndia.

InMay2006, theSEBI internalCommitteesubmitted its report givingabroad plan for

implementation of budget proposals on development of the corporate bond market in

India.

InMay2006,

a

copy

of

the

report

of

the

SEBI

internal

Committee

was

forwarded

to

RBI

fortheirperusalandcomments.

In May 2006, in its Annual Policy Statement for the year 200607, RBI announced

constitutionofaWorkingGrouptoexaminetherelevantrecommendationsoftheHigh

LevelExpertCommittee,havingabearingonReserveBanksresponsibilities inregardto

developmentofthecorporatedebtmarkettosuggestaroadmapforimplementation.

In July2006, RBIs WorkingGroup to examine recommendations of High Level Expert

Committeeon Corporate Bonds and Securitization involving RBI andsuggestaroadmap

forimplementationsubmitteditsReport.

In December 2006, Government issued clarifications on regulatory jurisdiction over

corporatebondmarketastheconfusionoverthesamewasattributedtobeareasonfor

slowprogressinimplantationoftheHighLevelExpertCommitteesrecommendationson

corporatebondsandsecuritization.AfterhearingtheviewsofRBIandSEBIandperusing

the provisions in SCRA, SEBI Act and the RBI Act, Finance Minister desired that the

necessary clarifications may be provided to RBI and SEBI so that they could implement
http://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/debt/expertreport.pdfhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/commreport/corporate_bond_market.htmlhttp://www.sebi.gov.in/debt/expertreport.pdf


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expeditiously, the announcement in the Budget that steps would be taken to create a

single,unifiedexchangetradedmarketforcorporatebonds.

InDecember2006, SEBI permitted BSE to set up a reportingplatform from January1,

2007 tocaptureallinformationrelatedtotradingincorporatebondsasaccuratelyandas

close

to

execution

as

possible.

SEBI

also

announced

its

intention

to

permit

recognized

stockexchangeshavingnationwideaccesstosetupcorporatebondtradingplatformto

enableefficientpricediscoveryandreliableclearingandsettlementinagradualmanner.

Accesstotheplatformforreportingwasgiventoallmarketintermediaries.Nonmembers

oftheExchangewereprovidedconnectivitythroughVirtualPrivateNetwork(VPN).

InJanuary2007,Governmentdiscussedtherelevantissuesofregulatoryjurisdictionand

marketdesignfurtheranddecidesasunder:

(a) Clarity on the agency responsible for different segments of the corporate debt

market

(i) SEBI will be responsible for primary market (public issues as well as private

placementbylistedcompanies)forcorporatedebt;

(ii) RBI will be responsible for the market for repo/reverse repo transactions in

corporate debt. However. If it is traded on exchanges, trading and settlement

procedurewouldbedeterminedbySEBI.

(iii) SEBIwillberesponsibleforthesecondarymarket(OTCaswellasExchange)forthecorporatedebt;

(iv) Theaboveframeworkwouldapplyirrespectiveoftheparties(bankornonbank

involvedinatransaction;

(v) The views in respect of trading of unlisted securities and derivatives on

corporatedebt

(other

than

repo/reverse

repo)

would

be

taken

as

and

when

the

needarises.

(b)Themarketdesignforthesecondarymarketofcorporatedebtmarket

(i) OTC as well as exchange based transactions need to be reported to reporting

platforms(s);

(ii) Alltheeligibleandwillingnationalstockexchangesneedtobeallowedtosetup

andmaintainreportingplatformsif theyapproachSEBIforthesame.SEBIneeds

tocoordinateamongsuchreportingplatformsandassignthejobofcoordination

toathirdagency;

(iii) The

trades

executed

on

or

reported

to

an

Exchange

need

not

be

reported

to

a

reportingplatform;

(iv) Theparticipantsmusthaveachoiceofplatform.TheymaytradeonOTCoranyexchangetradingplatform;

(vi) Existing exchanges could be used for trading of corporate debts. NSE and BSE

could provide trading platforms for this purpose. There is no need to create a

separateinfrastructure;
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(vii) There would be no separate trading platforms for different kinds of investors.

Institutionalandretailinvestorswouldtradeonthesameplatform;

(viii) OnlybrokerswouldhaveaccesstotradingplatformofanExchange.Bankswould

havetheoptionofbecominga brokerortradingthroughabroker. RBI,may if

considered necessary restricta bank to trade only on proprietary account as a

broker.

InJanuary2007,BSEoperationaliseditsreportingplatformtocaptureinformationrelated

totradingincorporatebondmarket.

InMarch2007,SEBIpermittedNSEalsotosetupandmaintainareportingplatformon

thelinesofBSE.ItwasalsodecidedthatBSEandNSEshallcoordinateamongthemselves

to ensure that the information reported with BSE and NSE is aggregated, checked for

redundancyanddisseminatedontheirwebsitesinahomogenousmanner.Asanintegral

part of development of a database, the two exchanges were advised to provide data

pertaining to corporate bonds comprising, issuer name, maturity date, current coupon,

last price traded, last amount traded, last yield (annualized) traded, weighted average

yield price, total amount traded and the rating of the bond and any other additional

informationasthestockexchangesthinkfit.

InMarch2007, the Fixed IncomeMoneyMarketandDerivativesAssociationof India

(FIMMDA)proposedtosetupareportingplatformforcorporatebondsandalsoprovide

value added dissemination of information on corporate bonds as in the case of

government securities. SEBI decided that till such time that FIMMDA sets up such a

platform, it shall disseminate information made available on bond trading by the two

exchangeswithappropriatevalueaddition.

In March 2007, SEBI rationalized the provisions of continuous disclosures made by

issuers who have listed their debt securities and not their equity shares on the stock

exchanges.

InMarch2007,NSEoperationaliseditsreportingplatformforcorporatebondsandstarts

disseminatinginformationasdesiredbySEBI.

InApril2007,SEBIpermittedbothBSEandNSEtohave inplacecorporatebondtrading

platformstoenableefficientpricediscoveryandreliableclearingandsettlementfacilityin

a

gradual

manner.

To

begin

with,

the

trade

matching

platform

was

to

be

order

driven

with

essential features of OTC market. It was also announced that eventually a system of

anonymousordermatchingshallbeestablished.BSEandNSEwereadvisedtomakeuse

of the existing infrastructure available with them for operating the trade matching

platforms for corporate bonds with necessary modifications. The exchanges were also

advised that on stabilization of the trade matching system, they may move to an

anonymousordermatchingsystemfortradingofbondswithinanappropriateperiodof

time.Accordingly,boththeexchangesweretoindicatetoSEBIanexpecteddateonwhich
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they could move to anonymous order matching system for trading in corporate bonds.

With the introduction of anonymous order matching platform, the clearing and

settlementfacilityweretobeprovidedbyBSEandNSEwithamultilateralnettingfacility

for trades executed on the platform. It was also simultaneously decided that orders

executed through trading platforms of either BSE or NSE shall not be required to be

reportedagain

on

the

reporting

platforms.

InApril2007,SEBI,whilepermittingboththeexchangesviz.BSEandNSEtosetuptrading

platforms,advisedthemthatthestockexchangesmayprovidetheirservicesforclearing

andsettlementofcorporatebondstradedortheentitiestradinginlistedcorporatedebt

securitiesmaysettletheirtradesbilaterally.

InApril2007,SEBIdecidedtoreducetheshutperiodincorporatebondstoalignitwith

thatapplicableforGovernmentSecurities.

InApril2007, SEBI decided to reduce tradable lots in corporate bonds in respect of all

entities including Qualified Institutional Investors to Rs.1 lakh and advises exchanges to

havealimitedsegmentfortransactionsinsimilarmarketlots.

InApril2007,SEBIdecidedtomakeitmandatoryforallnewissuesofcorporatebondsto

have an actual day count convention similar to that followed in respect of dated

GovernmentSecurities.

InApril2007,SEBImadeamendmentstothelistingagreementfordebenturestoensure

that services of ECS (Electronic Clearing Service), Direct Credit, RTGS (Real Time Gross

Settlement)orNEFT(NationalElectronicFundsTransfer),areusedforpaymentofinterest

and

redemption

amounts

as

per

applicable

norms

of

the

RBI

along

with

other

existing

facilities.

InApril2007,SEBImadeamendmenttothe listingagreementfordebenturestoensure

thatnomaterialmodificationshallbemadetothestructureofthedebentures issuedin

terms of coupon, conversion, redemption or otherwise without prior approval of the

stockexchangeswheretheyarelisted. Thestockexchangesshallalsoensuredthatsuch

information relating to modification or proposed modification is disseminated on the

exchangewebsite.

In

June

2007,

SEBI

put

up

Draft

Regulations

for

Public

Offer

and

Listing

of

Securitized

Debt Instrumentson itswebsite forpubliccomments. SEBIDraft Regulationsprovided

for a system of special purpose distinct entities which could offer securitized debt

instrumentstothepublicorcouldseek listingofsuch instruments.TheDraftdocument

also elaborated on the permissible structure for the special purpose distinct entity,

conditionsfortheirassignmentofdebtorreceivablesfromanyoriginator,procedurefor

launching of schemes, obligation to redeem securitized debt instruments, credit

enhancementand liquidity facilitieswhichcouldbe availedby theentity,conditions for
http://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/commreport/consult.pdfhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.htmlhttp://www.sebi.gov.in/circulars/2007/circbm0207.html


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appointing servicers, procedure to be followed for public offer of securitized debt

instruments,their listing,rightsof investors, inspectionanddisciplinaryproceedingsand

actionincaseofdefault.

InJuly2007,BSEandNSEtradingplatformsbecameoperational.Initially,tradematching

platformsat

BSE

and

NSE

were

order

driven

with

the

essential

features

of

OTC

market.

In August 2007, SEBI started placing information on secondary market trades (both

exchange and OTC trades) on its website on the basis of data provided by the two

Exchanges.

InAugust2007,SEBImadeitmandatorythatthecompaniesissuingdebenturesandthe

respective debenture trustees/stock exchanges shall disseminate all information

regardingthedebenturestotheinvestorsandthegeneralpublicbyissuingapressrelease

andalsodisplayingthedetailsontheirrespectivewebsites,intheeventof:

(i) Defaultbyissuercompanytopayinterestondebenturesorredemptionamount;

(ii) Failuretocreateachargeontheassets;

(iii) Revisionofratingassignedtothedebentures.

In August 2007, SEBI made it mandatory to make public, information/reports on

debentures issued including compliance reports filed by the companies and the

debenture trustees by placing them on websites of the companies and the debenture

trustees. The same was also required to be submitted to the stock exchanges for

disseminationthroughtheirwebsites.

InAugust 2007, SEBI granted approval to FIMMDA for startingCorporateBondTrade

ReportingPlatform.

In September 2007, FIMMDA reporting platform became operational as the third

reporting platform after BSE and NSE. Accordingly, for reporting of OTC trades, the

concerned parties could opt to report their trades on any one of the three reporting

platforms.

InSeptember2007,SEBIadvisedBSEandNSEtoconfirmtheirpreparednessforgoingin

for introduction of repos in corporate bonds so that it could request RBI to issue

appropriateguidelinesforthepurposeassuggestedbytheHighLevelExpertCommittee

on

Bonds

and

Securitization.

InOctober2007, SEBI obtained confirmations fromBSE andNSE ontheirpreparedness

for introductionofrepos incorporatebonds.Sincerepos incorporatebonds fellunder

theregulatorypurviewofRBI,SEBIhadrequestedRBItoinitiateactionasrequired.

In November 2007, SEBI issued letters indicating no objection to entities which had

approached SEBI for setting up of electronic systems to facilitate price discovery and
http://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/debt/nocquote.pdfhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/circulars/2007/mirsdcir1107.htmlhttp://www.sebi.gov.in/debt/corpbondsarchivesnew.html


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bringing about transparency into corporatebond trading. The systems wasproposedto

help display of buy sell quotes of counter parties involved so that the buyers and the

sellersinthecorporatebondmarketcouldstrikedealsatbestpricesbeforetheygoinfor

ordermatchingeitherattheexchangeorbilaterally.

InDecember

2007,

SEBI

vide

circular

dated

December

03,

2007

amended

the

provisions

pertaining to issuances of Corporate Bonds under the SEBI (Disclosure and Investor

Protection)(DIP)Guidelines,2000.ThechangestotheGuidelineswereasbelow:

(a) For public/ rights issues of debt instruments, issuers now needed to obtain rating

from only one credit rating agency instead of from two. This was with a view to

reducethecostofissuances.

(b) In order to facilitate issuance of below investment grade bonds to suit the risk/

return appetite of investors, the stipulation that debt instruments issued through

public/rightsissuesshallbeofatleastinvestmentgradehadbeenremoved.

(c) Further, in order to afford issuers with desired flexibility in structuring of debt

instruments, structural restrictions such as those on maturity, put/call option, on

conversion,etchadbeendoneawaywith.

In January2008,SEBI framedDraftRegulationson IssueandListingofDebtSecurities

and the places on same on the SEBI website along with a consultative paper for Public

Comments.Salientfeaturesofthedraftregulationsincludedrationalizationofdisclosure

requirements,enhancedresponsibilitiesofmerchantbankersforexercisingduediligence

andmandatorylistingofprivateplacementofdebtissuedasperexemptionunderS.67(3)

ofthe

Companies

Act.

The

paper

also

made

provisions

for

eissuances

of

corporate

debt

andproposesintroductionofrationalizedlistingrequirementsfordebtofalistedissuer.

In February 2008, In addition to the letters indicating no objection communicated to

three entities in November 2007, a similar letter indicating no objection had been

communicated to a fourth entity that had approached SEBI for setting up a similar

electronicsystemthatwillhelpdisplaybuysellquotesofcounterpartiesinvolvedsothat

thebuyersandthesellersinthecorporatebondmarketcouldstrikedealsatbestprices

beforetheygoinforordermatchingeitherattheexchangeorbilaterally.

In

February

2008,

Finance

Minister

in

his

Budget

speech

of

2008

09

announced

that

as

announced in the Budget Speech of 2006 about taking steps to create an exchange

tradedmarket forcorporatebonds, both BSE and NSE created platforms for trading in

corporatebonds.TheFinanceMinisterproposedtomoveforwardbytakingsomemore

measurestoexpandthemarketforcorporatebondssuchas:
http://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdfhttp://www.sebi.gov.in/acts/DraftDebtReg.pdfhttp://www.sebi.gov.in/acts/DraftDebtReg.pdfhttp://www.sebi.gov.in/acts/DraftDebtReg.pdfhttp://www.sebi.gov.in/commreport/DebtReg.pdfhttp://www.sebi.gov.in/commreport/DebtReg.pdfhttp://www.sebi.gov.in/commreport/DebtReg.pdfhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://indiabudget.nic.in/ub2008-09/bs/speecha.htmhttp://www.sebi.gov.in/commreport/DebtReg.pdfhttp://www.sebi.gov.in/acts/DraftDebtReg.pdfhttp://www.sebi.gov.in/circulars/2007/dip0307.pdf


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takemeasurestodevelopthebond,currencyandderivativesmarketsthatwillinclude

launching exchangetraded currency and interest rate futures and developing a

transparentcreditderivativesmarketwithappropriatesafeguards;

enhancethetradabilityofdomesticconvertiblebondsbyputtinginplaceamechanism

thatwillenable investorstoseparatetheembeddedequityoption fromtheconvertible

bondand

trade

it

separately;

and

encourage the development of a marketbased system for classifying financial

instrumentsbasedontheircomplexityandimplicitrisks.

The Finance Minister also announced that supplementing the measures announced in

respect of the corporate debt market, it was proposed to exempt from TDS, corporate

debtinstrumentsissuedindematformandlistedonrecognizedstockexchanges.

InMarchApril2008,SEBIreviewedalargenumberofpubliccommentsreceivedonthe

DraftRegulationsonIssueandListingofDebtSecuritiesandtheconsultativepaperwhich

wereplacedonthewebsiteinJanuary2008.

In April 2008, on the lines as proposed in the consultative paper placed on the SEBI

website in respect of draft Regulations for issue and listing of debt securities, SEBI

discussedwithstockexchanges,BSEandNSEonsimplifyingandrationalizingthelisting

agreementfordebentures.Theunderlyingphilosophyforthesamewas:

(a)wheretheequityofacompany is listed,andsuchcompanywishesto issuedebt

instruments (whether by way of public offering of private placement), as large

amountofcompanyrelated information isalready inpublicdomainandmaterial

developments are available as per the equity and listing agreement on a nearly

continuousbasisminimalincrementaldisclosuresaresufficient;and

(b)where

the

equity

of

the

issuer

is

not

listed,

and

such

acompany

raises

debt

capital

(whether by way of public offering of private placement) detailed disclosures,

(fewerthanequitysecuritiesdisclosuresthough),arerequired

InAprilMay2008,SEBIdiscussedwiththestockexchangesBSEandNSEonintroduction

ofmandatoryclearingandsettlementfortradesincorporatebonds.Thiswasinlinewith

the discussions had with RBI in December 2007 towards preparing the market for

introductionofRepos..

InMay2008,SEBIreceivedadraftListingAgreementfordebtsecuritiespreparedbyBSE

dand

NSE

in

consultation

with

SEBI.

The

said

draft

listing

agreement

suggested

only

one

listing agreement for debt securities irrespective of whether the equity of the issuer is

already listed or not and whether debt securities have been issued by way of a public

issue or a private placement. The applicability of clauses has been demarcated in the

listingagreementasbelow:

(a) Part A of the debt listing agreement would be applicable in case the issuer has

equitysharesalreadylistedontheexchangeandhascompliedwiththecovenants

appearing intheequity listing agreement. Insuchacase,the issuermaycomply


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Page 8 of 12

withminimaldisclosurerequirementsspecifiedinclauses1to4oftheagreement.

Itisspecifiedthatincasetheequityoftheissuerisdelistedfromtheexchangeat

alaterdate,theissuerismandatedtocomplywithPartBoftheagreement.

(b)Part Bofthe debt listing agreement wouldbe applicable for issuerswhodonot

have their equity listed on the stock exchange or do not otherwise satisfy the

requirementsto

make

disclosures

as

per

Part

A.

Clauses

5to

21

of

the

agreement

wouldbeapplicableforsuchissuers.

InMay2008,SEBIgathered informationfromdepositoriesNSDLandCDSLontransfers

inCorporateBondsonamonthlysummarybasisandstartedplacingthe informationon

transfersincorporatebondsatdepositoriesonitswebsite.

In May 2008, SEBI set up an Advisory Committee named Corporate Bonds and

SecuritizationAdvisoryCommittee(CoBoSAC)formakingrecommendationstoSEBIon

developingthemarketforcorporatebondsandsecuritizeddebtinstrumentsfurther.

In May 2008, the SEBI (Public Offer and Listing of Securitized Debt Instruments)

Regulations,2008werenotifiedintheOfficialGazettedatedMay26,2008.

In June 2008, the SEBI (Issue and Listing of Debt Securities) Regulations, 2008were

notifiedintheOfficialGazettedatedJune06,2008.

In July2008, the firstmeetingof thenewly setupCorporateBondandSecuritization

AdvisoryCommittee (CoBoSAC) was convened under the Chairmanship of Dr RH Patil.

The Committee deliberated on streamlining mechanisms for reporting, clearing and

settlementandondevelopmentsintheCorporateBondMarkettodate.TheCommittee,

after

deliberation

recommended

implementation

of

mandatory

DvPIII

clearing

and

settlementonexchangeswithRTGS. Inthemeantime, itwasrecommendedtosetupa

subgroupthatwouldlookintoissuesrelatedtotradereporting.

InAugust 2008, SEBI placed the draft simplified listing norms for debt securities as

defined in the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 prepared in

consultationwithBSEandNSEontheSEBIWebsiteforpubliccomments.

In

October

2008,

the

second

meeting

of

CoBoSAC

was

convened.

Inter

alia,

the

CommitteestressedontheimportanceofstockexchangeshavingRTGSaccessinorderto

introduceclearingandsettlementthroughthestockexchangeclearinghouses.Also,the

SEBIproposalonelectronicissuanceswasdiscussedindetailatthemeeting.

InDecember2008,thethirdmeetingofCoBoSACwasconvened.Thecommittee, inter

alia, discussed the analysis on privately placed bonds, the report of the subgroup on
http://www.sebi.gov.in/debt/corpdep.htmlhttp://www.sebi.gov.in/debt/corpdep.htmlhttp://www.sebi.gov.in/debt/corpdep.htmlhttp://www.sebi.gov.in/debt/corpdep.htmlhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/debtregu.pdfhttp://www.sebi.gov.in/acts/sdireg.pdfhttp://www.sebi.gov.in/debt/corpdep.html


9/12

Page 9 of 12

reporting of corporate bond trades and the policy clarifications that needed to be

communicatedtothemerchantbankersoftheproposedissuebyTataCapitalLimited.

InDecember2008,SEBIcommunicateditsclarificationsonpolicyissuestothemerchant

bankerstotheproposedpublicissuebyTataCapitalLimitedwhohadsoughtclarifications

underthe

recently

notified

SEBI

(Issue

and

Listing

of

Debt

Securities)

Regulations,

2009.

InFebruary2009,thefirstpublicissueofnonconvertibledebtsecuritiesundertheDebt

Regulationswas made byTataCapitalLimited.The issue opened on February 02, 2009

andclosedonFebruary24,2009.ThesizeoftheissuewassetatRs.500crorewithagreen

shoeoptionuptoRs.1000crore.Sincetheissuewasoversubscribed,theissuerexercised

thegreenshoeoption.ThefinalissuesizethusstandsatRs.1500crore.

InMay2009,RBIsentacommuniqutoSEBIoutliningthenormsforgrantingRTGSaccess

totheclearingcorporationsofstockexchangessoastofacilitateDVPIbasedtradefor

tradesettlementforthefundslegofcorporatebondtrades.Theclearingcorporationsof

NSEandBSEsubmittedtheirapplicationsforthesamethroughSEBI.

InMay2009, SEBI put in place the simplified listingagreement fordebt securities. As

wasproposedinthedraftforpubliccomments,issuerswithlistedequitywhoarealready

subjecttodetaileddisclosurerequirements,nowhavetomakeminimaldisclosureswhile

issuers of listed debt alone make reasonably elaborate disclosures but less than those

required under the equity listing agreement. The simplified listing agreement has two

partsA&B.Issuerswithequitylistedneedtocomplywiththebriefdisclosuresasperpart

A while those with unlisted equity or non compliance otherwise with the Equity Listing

AgreementwouldrequirecompliancewithPartBofthesimplifiedlistingAgreement.

InMay2009,thefourthmeetingofCoBoSACwasconvened.Thecommittee, interalia,

discussedtheanalysisonreportingofCorporateBondspreparedbyNSDLand learnings

fromtherecentissuebyTataCapitalLimited.CoBoSACalsoreviewedthepreparednessof

theclearinghousesatNSEandBSEfortheRTGSbasedclearingandsettlement.

InJune2009,theapplicationsmadethroughSEBIbytheclearingcorporationsofNSEand

BSEforaccesstotheRBIRTGSsystemwereforwardedtoRBIforitsconsideration.

InJune2009,SEBI issuedacircularclarifyingtheapplicabilityofregulations/guidelines

of

SEBI

on

privately

placed

convertible

debt

securities

That

the

issue

of

debt

securities

thatareconvertible,eitherpartiallyorfullyoroptionallyintolistedorunlistedequityshall

beguidedbythedisclosurenorms interms ofSEBI (Disclosureand InvestorProtection)

Guidelines,2000. Thecircularalsospecifiedthattheissueandlistingofnonconvertible

debt securities, whether issued to the public or privately placed shall be done in

accordance with the provisions of the SEBI (Issue and Listing of Debt Securities)

Regulations,2008.
http://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdfhttp://www.sebi.gov.in/circulars/2009/bondcir02.pdfhttp://www.sebi.gov.in/circulars/2009/bondcir02.pdfhttp://www.sebi.gov.in/circulars/2009/bondcir02.pdfhttp://www.sebi.gov.in/circulars/2009/bondcir02.pdfhttp://www.sebi.gov.in/circulars/2009/debtcir.pdf


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Page 10 of 12

In July 2009, SEBI issued a circular to all Mutual Funds, AMFI, Stock Exchanges and

FIMMDA,making itmandatorytoreport interschemetransfersofCorporateBondsby

MutualfundsoneitherofthereportingplatformsofBSE,NSEorFIMMDA.

InAugust2009, the reportingof interscheme transfersof Corporate Bonds by Mutual

Fundswas

started.

The

data

is

also

updated

on

the

SEBI

Website

at

this

link.

InOctober2009, SEBI issueda circularonMandatory SettlementofCorporateBonds

TradesthroughClearingCorporationaccordingtowhich,fromDecember2009,allSEBI,

RBIandIRDAregulatedentitiesweredirectedtoclearandsettletheirtradesthroughthe

National Securities Clearing Corporation Limited (NSCCL) or the Indian Clearing

Corporation Limited (ICCL). The settlement is on T+1 or T+2 on DVP1 basis without any

guaranteeofsettlementfromtheclearingcorporations.

InMarch2010,SEBItookupwithconcernedauthoritiesforpensionfundsandruralco

operative banks, subsequent to which EPFO also directed all PFs to settle their trades

through NSCCL or ICCL; and NABARD and RBI directed all state and rural cooperative

bankstosettletheirtradesthroughNSCCLorICCL.

In March 2010, SEBI directed exchanges to present issuerrelated information on

exchangewebsites inauniformformat.Thiswasdonewithaviewtomakeavailablea

comprehensivedatabaseoflistedcorporatebondsinpublicdomain.

InDecember2010, SEBI directed exchanges to ensure that all issuers use interest rate

conventionofActual/Actual.ThiswasdonesinceithadcometothenoticeofSEBIthat

various entities were using different day count conventions like Actual by Actual, 30 by

360or

30

by

365

for

calculating

interest

rates

and

present

value

at

the

time

of

issue

of

bonds.

InFebruary2011, subsequent to HLCCFM decision, meeting of MCA, RBI and SEBI was

heldtoclarifythatRBIwouldregulatethe issuanceof instrumentsofmaturity lessthan

oneyear,SEBlwouldregulateissuancesoflistedinstrumentsofmaturitymorethanone

year, and MCA would regulate unlisted securities of instruments of maturitymore than

oneyear.

InJune2011,SEBIdirectsexchangestodoawaywithshutperiodforinterestpayments

or

for

part

redemptions.

This

was

with

a

view

to

bring

about

uniformity

in

shut

periods

for

corporate bonds. Further, SEBI directed exchanges to ensure that issuers have a record

date not more than 15 days prior to book closure for all prospective privately placed

issuesofcorporatebonds.

In August 2011, SEBI amended the Regulations for Mutual Funds, permitting Mutual

FundstosetupInfrastructureDebtFundsundertheMutualFundsFramework.
http://www.sebi.gov.in/circulars/2009/cirimd032009.pdfhttp://www.sebi.gov.in/debt/interscheme.htmlhttp://www.sebi.gov.in/debt/interscheme.htmlhttp://www.sebi.gov.in/debt/interscheme.htmlhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1315305030302.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1315305030302.pdfhttp://www.sebi.gov.in/cms/sebi_data/attachdocs/1289463950123.pdfhttp://www.sebi.gov.in/debt/interscheme.htmlhttp://www.sebi.gov.in/circulars/2009/cirimd032009.pdf


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InSeptember2011,SEBIputs inplaceconditions for issueofStructuredProducts.This

wasdonewithaviewtoenhancedisclosures for issueofdebt instrumentswithreturns

liked to various market indices. Additional norms include restricting eligible issuers to

those that have a networth of INR 100cr, minimum ticket size of issue at INR 1 lakh,

selling practices, additional disclosures pertaining to riskiness of such instruments,

scenario

analysis

showing

its

value

under

various

market

conditions,

commission

structureembeddedtherein,etc.Thirdpartyvaluationbyacreditratingagencywasalso

mademandatoryandthesameshallbedisclosedtopublic.

InDecember 2011, SEBI advised that in respect of public issues of debt securities,no

personconnectedwiththeissueshallofferanyincentive,whetherdirectorindirect,in

any manner, whether in cash or kind or services or otherwise to any person making an

application for allotment of such securities. This was done to prevent the practice in

public issues of debt where, some brokers/ distributors are passing on part of their

brokerage/ commission to the final investor(s) for subscription to such public issue of

debtwhichresultedinanunfairadvantage/bargainingpowertoacertainsetofinvestors

anddistributorswhileontheotherhandaddingtothecostofissuanceforthecompany.

SummaryofCorporateBondMarketData

TradinginCorporateBonds

Date No.ofTrades Amount(INRcr)

200708 19079 95889.71

200809 22683 148166.18

200910 38230 401198.04

201011 44060 605274.24

AprDec2011 36620 422147.11

SettlementofCorporateBonds

Month TotalNo.ofTradesSettled TotalSettledValue(INRCr)

201011 32662 450123.15

AprDec2011 27272 291674.19

InterSchemeTransfersbyMutualFunds

Month TotalNo.ofTrades TotalAmount(INRcr)

201011 8431 319031.84

AprDec2011 2477 32835.06

PrivatePlacementData

Month No.ofIssues Amount(INRCr)

200708 744 118484.64

200809 1041 173281.18

200910 1278 212634.92
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201011 1404 218785.41

AprDec2011 1404 188530.48

PublicIssueData

Month No.ofIssues Amount(INRCr)

200708

0 0.00

200809 1 1,500.00

200910 3 2,500.00

201011 10 9,451.00

AprDec2011(prov) 12 15045.84
http://www.sebi.gov.in/cms/sebi_data/docfiles/21671_t.html

Documents

Debt Datta