Contact Your Financial Adviser Money Making MC
19Th Aug 2016
In a bid to develop a strong corporate bond
market in India, an expert group on Thursday suggested standardisation of
corporate bond issuance, relaxing norms for allowing foreign investments,
creation of a bond index and encouraging corporates to tap the market.
A report of the Working Group on Development
of Corporate Bond Market in India released by the Securities Exchange Board of
India (SEBI) on Thursday also said that a centralised database for corporate
bonds markets may be established expeditiously in two phases, for secondary
market trades by the end of August 2016 and for both primary and secondary
markets by the end of October 2016.
The report said though equity indices serve
as popular benchmarks for equities, designing debt indices has posed challenges
in India as the market lacks breadth and depth.
"Market participants, however, need a
debt market index as benchmark. SEBI is in dialogue with stock exchanges to
design a suitable debt market index. Stock exchanges/other entities may design
a suitable corporate bond index to serve as a benchmark," the panel
recommended.
Among various recommendations, the panel said
corporates should be encouraged to tap the bond market beyond a cut-off level.
"Large corporates with borrowings from the banking system above a cut-off
level may be required to tap the market for a portion of their working capital
and term loan needs."
"Necessary guidelines may be issued by
RBI (Reserve Bank of India) taking into account market conditions by September
2016," the report said.
The panel also suggested necessary amendments
in FEMA regulations to urge foreign portfolio investors (FPIs) to invest in
corporate bonds. "Necessary amendments may be made in FEMA regulations to
allow investment by FPIs in unlisted debt securities and pass through
securities issued by securitisations SPVs/Special Purpose Distinct Entity
(SPDE) as announced in the Union Budget 2016-17," the report said. The Total Investment & Insurance
Solutions
Necessary notification, in this regard, may
be issued by the RBI by end August 2016, it said.
In order to standardise bond issuance, it
said, "...SEBI may have a re-look at the guidelines issued in October 2013
so as to clarify on day count convention, shut period, basis for yield
calculation, calculation of coupon interest and redemption with intervening
holidays with illustrations."
The working group comprises nominees from
Reserve Bank, Finance Ministry, SEBI, Insurance Regulatory Development
Authority of India and Pension Fund Regulatory and Development Authority
(PFRDA). The Total Investment &
Insurance Solutions
The report said given that the public sector
banks would be required to raise around Rs 80,000-85,000 crore by way of
issuance of AT-1 instruments, there is an implicit need to broaden the investor
base and make these instruments more attractive to the investors.
"Insurance companies and EPFO
(Employees' Provident Fund Organisation) may be allowed to invest in AT-1 bonds
of banks subject to prudential limits with credit rating up to investment
grade," it said.
The panel also said regulated entities like
banks, PDs, in addition to brokers, may be encouraged by the regulators to act
as market makers in corporate bond market subject to appropriate risk management
framework. The Total Investment &
Insurance Solutions
The panel suggested the credit rating
agencies may be mandated to strictly adhere to the regulatory norms with regard
to timely disclosure of defaults on the stock exchanges and their own website.The Total Investment & Insurance
Solutions
No comments:
Post a Comment