SEBI plans debt segment on bourses for banks

The Securities & Exchange Board of India proposes to create a separate debt segment on stock exchanges where banks would be allowed to become trading members of the bourses. The move is aimed at developing the corporate debt market in the country.

"This will help in the development of the debt market on the Indian stock exchanges. It will bring in more volumes and liquidity," SEBI chairman U K Sinha said after the market regulator's board meeting.

"I personally feel that it's a very positive decision and what the Reserve Bank of India has done, we in SEBI are trying to implement," he said.

In another decision, SEBI said, it would amend regulations to enable two-way fungibility of Indian Depository Receipts of foreign firms listed in India, after which investors could benefit from leveraging between the Indian and foreign securities of the concerned company.

Besides, the SEBI board also approved various amendments to its regulations governing infrastructure debt funds (IDFs), including allowing the tenure of such funds to be extended by up to two years with the consent of two-thirds of the investors.

About the new debt segment on stock exchanges, SEBI said it will provide for trading, reporting, membership, clearing and settlement rules, risk management framework and other necessary provisions.

The move would facilitate scheduled commercial banks to become members of recognised bourses for the purpose of undertaking proprietary transactions in the corporate bond market.

Besides, in order to enable direct membership of banks and other institutional participants in the debt segment, SEBI has approved some amendments related to its rules governing stock-brokers and sub-brokers.

The regulator has included debt, derivatives and currency derivatives segment in the definition of clearing members, self-clearing members and trading members.

The board has also introduced the definition of "proprietary trading member" to permit institutions such as scheduled commercial banks, primary dealers, pension funds, provident funds, insurance companies and mutual funds to trade in the debt segment.

Regarding, IDF, SEBI said an IDF scheme would be allowed to invest up to 30 per cent of its assets under management in assets from the current ceiling of 20 per cent.

The new investment limit is subject to the condition that the sponsor/associate retains at least 30 per cent of the assets sold to the IDF as long as the assets are held in the IDF portfolio.