Sebi pitches for protection of all investors in corp bond market

Regulator urges govt to grant recovery powers, currently enjoyed only by banks and institutions, to retail investors as well

Pitching for protection of corporate bond market investors, Sebi chairman U K Sinha today said the regulator has written to the government asking for access to recovery mechanisms to other investors beyond banks and financial institutions.

"The Act with regard to DRTs (Debt Recovery Tribunals) or Sarfesi does not provide the same protection (to other investors) as has been provided to banks and financial institutions," Sebi chairman U K Sinha said, addressing an event organised by ratings agency Crisil here.

He was referring to current laws which grant powers of recovery in case of a default by a company to only banks and financial sector while investing in corporate bonds.

"Sebi has taken up this matter with the government, we are actively pursuing it, we have no clue what they are finally going to do but my impression is that our recommendations are being considered favourably," he added.

Earlier, Crisil's managing director and chief executive Roopa Kudva also pointed this as a deterrent factor for the investor.

"Other investors in the corporate bond market do not have access to these recovery and resolution mechanisms, which is an issue," she said.

It can be noted that given the push to deepen the corporate bond market by policymakers, investment in lower- rated companies is essential.

Kudva also said that regulatory hurdles which prevent EPFO companies from trading in the secondary market for corporate bonds should also be done away with.

She also pointed to data showing that it is only higher rated companies which have raised the most and stressed on the need to broad-base the same.

Just like the equities market, where listed companies report credit events to the exchanges, there is a need to have a credit event reporting system in the corporate bond market as well to maintain highest standards of transparency, Kudva said.

Sinha said there is a need to increase the retail investors' play in the corporate bond market as well.

Kudva said there is also a need for the government to reduce the fiscal deficit to increase the activity in the corporate bond market.