You are here: Home » Markets » News
Business Standard

Sebi issues new bond regulations to reduce corporates' funding sources

The new norms will also prevent the use of certain complex transaction structures

Press Trust of India  |  Mumbai 

Sebi
The logo of the Securities and Exchange Board of India (SEBI) is pictured on the premises of its headquarters in Mumbai (Photo: Reuters)

The new regulations of (Sebi) on foreign holdings of rupee-denominated will reduce options for companies to diversify their sources, says a report.

Last week, the had said that foreign purchases of rupee-denominated would only be permitted through auction once the foreign holdings reached 95 per cent of the cap.


"New, tighter regulations on foreign holdings of rupee-denominated and offshore issuance will reduce options for companies to diversify their sources, at least temporarily," Fitch Ratings said in a report.

The new norms will also prevent the use of certain complex structures, which have recently gained popularity among corporate issuers, it said.

At present, the foreign portfolio investors can invest up to Rs 2,44,300 crore ($ 51 billion) in issued by domestic companies.

is already above 95 per cent of the cap, which means these restrictions have come into effect, the report said.

Issuance of offshore 'masala bonds' will also cease entirely until falls to 92 per cent of the cap.

"The hiatus on masala bond issuance triggered by SEBI's regulations has put the plans of some large corporates on hold. The decision could dent confidence in the instrument and hold back the market's medium-term development," the report said.

The first masala were only issued in mid-2016, and the market still lacks the depth that would make them more attractive to

Better quality issuers, such as NTPC, should be able to reconsider masala bonds, if and when the cap on of rupee is eventually raised or falls sufficiently, it said.

A separate ruling earlier in the month by the Reserve Bank had already tightened the rules on masala bond issuance, banning their sale to related entities, lowering the cap on spread over government bonds, and extending the minimum maturity.

First Published: Fri, July 28 2017. 17:43 IST
RECOMMENDED FOR YOU