Sebi proposes stricter framework for corporate bonds, debenture trustees

Sebi has also suggested that NBFCs create charge on the identified assets for every bond issue

Amid rising instances of defaults, markets regulator Sebi on Tuesday proposed stronger framework for governing corporate bonds and debenture trustees, including enhanced disclosure requirements.

Among other measures, the watchdog has suggested that NBFCs (Non-Banking Financial Companies) create charge on the identified assets for every bond issue.

Sebi has issued a consultation paper on 'Review of the Regulatory Framework for Corporate bonds and Debenture Trustees'.

"The increased events of default by a few financial institutions and the lapses/ complications on the part of debenture trustees in the expeditious enforcement of the security has brought to the fore the need for a review of the present regulatory framework for debenture trustees," Sebi said.

In order to enhance transparency, the regulator has also proposed to mandate minimum disclosures.

For standardisation of Debenture Trust Deed (DTD), Sebi has proposed that the same should be bifurcated into two parts. One part should have standard clauses common to all DTDs. The second part should contain specific and customised clauses and covenants relevant to the particular issue for which the DTD is executed.

"An SOP (Standard Operating Procedure) shall be prepared that shall list out the penalties for specific violations by the issuer company for the listed debt," the watchdog said.

Public comments have been sought on the consultation paper till March 17.