SEBI greenlights backstop fund for corporate debt market

Mumbai: Sebi has approved a fund to backstop the corporate debt market for buying ill-liquid and investment grade debt paper, it said on Wednesday. This will help instill confidence in investors on the corporate bond market and also enhance secondary market liquidity.

In February, Reuters had reported that India is setting up a fund worth Rs 330 billion ($4 billion) to provide liquidity to its corporate debt market during bouts of stress, to help stem panic selling and ease redemption pressures.

Finance Minister Nirmala Sitharaman announced last year that the government had taken up the SEBI's proposal for the fund, without giving details.


Corporate Debt Market Development Fund (CDMDF), based on a guarantee to be provided by National Credit Guarantee Trust Company (NCGTC), may raise funds to purchase corporate debt securities during market dislocation.

“Access to the fund for selling securities during market dislocation shall be to specified mutual fund schemes in proportion to the contribution made to the Fund at a mutual fund level,” SEBI said.

SEBI has also decided that the period of compliance for Large Corporates to raise 25% of their incremental borrowings through the debt market be extended to a contiguous block of 3 years instead of the current 2 years.

Further, based on the industry feedback, SEBI has decided to extend the ‘comply or explain’ period for High Value Debt Listed Entities (HVDLEs) with respect to corporate governance norms till March 31, 2024.

With inputs from Reuters