Sebi proposes easing debt listing norms, raising ISIN maturity limits

Sebi has proposed scrapping mandatory listing of past debt issues and raising the annual ISIN cap to 17, aiming to ease funding constraints and reduce refinancing risks for issuers

The Securities and Exchange Board of India (Sebi) has proposed several changes to ease funding constraints and improve liquidity management for debt issuers. These changes include scrapping an earlier mandate related to listing past debt securities and relaxing the framework governing International Securities Identification Numbers (ISINs). 

 

To ease listing requirements, Sebi suggested removing the requirement for issuers to mandatorily list all outstanding unlisted non-convertible debt securities issued after January 1, 2024, at the time of first listing.

 

Instead, listing past issuances would be left to the issuer's discretion, while the requirement to list all subsequent issuances would continue.

 

 

“Considering the significant cost and operational challenges involved in listing already subscribed outstanding issues by a new issuer, dispensing with this requirement shall encourage listing of debt securities,” notes Sebi.

 

The mandate to list all outstanding unlisted non-convertible debt securities of a listed entity was introduced in September 2023 and came into effect from January 2024.  

 

Sebi’s analysis of quarterly data showed that the amount of listed debt issuances as a percentage of total debt issuances declined from 80.81 per cent as of September 2023 to 76.55 per cent as of June 30. This indicates that the mandate to list past issues could have been a possible reason for the reduction in listing.

 

Separately, the regulator proposed increasing the maximum number of ISINs that can mature in a financial year to 17 from the existing 14. This would include up to 12 ISINs for plain vanilla debt securities and five for structured and market-linked instruments, including floating rate bonds and zero coupon bonds.

 

The proposal also introduces a tiered mechanism to allow additional ISINs for large issuers. Once the outstanding amount of plain vanilla debt maturing in a financial year reaches ₹15,000 crore, one additional ISIN would be permitted for every incremental ₹3,000 crore.

 

Sebi has further proposed excluding certain categories-such as Government of India-serviced bonds, extra budgetary resources (EBR) bonds, and ESG debt securities-from the ISIN cap. This is aimed at providing flexibility to public sector entities and encouraging issuance of ESG-linked instruments.

 

“Since PSUs frequently issue EBR bonds on behalf of GoI, the prescribed ISIN caps constrain their ability to issue bonds for their own funding requirements. Therefore, excluding GoI/ EBR bonds from the prescribed ISIN caps would provide PSUs with an adequate number of ISINs for their financing needs,” the regulator noted.

 

The proposed changes come in response to feedback from market participants, who flagged that existing ISIN limits could lead to bunching of liabilities and refinancing risks, particularly for non-banking financial companies.

 

Public comments on the proposals have been invited till August 31.