NBFCs may get to invest in security receipts
Non-banking financial companies (NBFC) may get to invest in security receipts (SRs). A proposal in this regard is being examined by the government and the Reserve Bank of India.
By Deepshikha Sikarwar, TNN |
NEW DELHI: Non-banking financial companies (NBFC) may get to invest in security receipts (SRs). A proposal in this regard is being examined by the government and the Reserve Bank of India.
The proposal is aimed at deepening the SR market. SRs are essentially bonds issued by asset reconstruction companies to banks when they buy bad loans from them. RBI is not enthusiastic on the proposal and is in favour of a more cautious approach.
However, the finance ministry is of the view that since NBFCs are being regulated by the central bank itself, it should not be an issue. Also, some criteria about the kind of NBFCs that can invest can be prescribed.
The proposal owes its genesis to a recommendation by an internal Sebi committee, chaired by T C Nair, that was set up to work out a plan for a unified exchange for exchange-traded corporate bond market. The committee was set up as a follow up to the finance minister P Chidambaram’s announcement on accepting the recommendations of the high-level committee on corporate bonds and securitisation in his budget speech on February 28, 2006.
“With a view to deepen the investor base of qualified institutional buyers (QIB) that can invest in SRs, it is suggested that large-sized NBFCs and non-NBFCs corporate bodies established in India with net own funds in excess of, say, Rs 50 crore, may be permitted to invest in SRs as QIBs,” the Sebi internal committee had said.
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As a part of initiative to develop the SR market, Sebi-registered foreign institutional investors were allowed to invest in SRs in 2005. However, FII investment was capped at 49% of each tranche of the scheme of SR while an individual FII can take only up to 10%. A cap on the similar lines may also be prescribed for investments by NBFCs.Start a SIP with as low as ₹500 with ET Money App!
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