MUMBAI: Markets regulator Sebi on Monday tightened the rules for listed bonds. Companies had been asked to pay an extra 2% pastime to holders of privately placed bonds in case of a default, and 1% further pastime in case of prolong in checklist. Aiming to bring in larger accountability among debentures trustees, Sebi also asked companies to disclose remunerations for the trustees and asked them to justify the bills by means of disclosing the rationale at the back of them.
The changes to regulations for bonds come within the backdrop of a series of defaults and behind schedule bills by means of one of the vital main companies, which started with IL&FS in September 2018 and persisted with DHFL and some companies from the Zee Group and Reliance (Anil Ambani) Group.
Since all the institutional traders like mutual price range and insurance companies are allowed to speculate best in bonds which are listed, those further regulations, in impact, would put an extra burden on companies on the subject of compliance, which in flip would make the bond market a safer position than now, fund managers stated.
“In case of default in fee of pastime and/or major redemption at the due dates, further pastime of a minimum of 2% consistent with annum over the coupon price will be payable by means of the company for the defaulting period (to the holders of privately placed bonds),” the Sebi circular stated.
“In case of prolong in checklist of the debt securities past 20 days from the deemed date of allotment, the company shall pay penal pastime of a minimum of 1% consistent with annum over the coupon price from the expiry of 30 days from the deemed date of allotment until the checklist of such debt securities to the investor,” it stated.
Industry players stated that now and then, if an organization delays servicing a bond, debenture trustees, who're required to act on behalf of the traders, don't disclose such delays. The new regulations will exchange such practices. However, they don't seem to be very positive how an organization, which is in default because of monetary difficulties, will be capable to pay the two% extra pastime.
“Defaults occur because of monetary difficulties and infrequently because of fraudulent behaviour at the part of the company. So, it’s tough to wager how an organization in monetary issue would organize to pay the two% extra pastime,” stated a number one fund supervisor. “Sebi’s intent is also just right, but I’m now not positive if this is feasible,” the fund supervisor stated.
The changes to regulations for bonds come within the backdrop of a series of defaults and behind schedule bills by means of one of the vital main companies, which started with IL&FS in September 2018 and persisted with DHFL and some companies from the Zee Group and Reliance (Anil Ambani) Group.
Since all the institutional traders like mutual price range and insurance companies are allowed to speculate best in bonds which are listed, those further regulations, in impact, would put an extra burden on companies on the subject of compliance, which in flip would make the bond market a safer position than now, fund managers stated.
“In case of default in fee of pastime and/or major redemption at the due dates, further pastime of a minimum of 2% consistent with annum over the coupon price will be payable by means of the company for the defaulting period (to the holders of privately placed bonds),” the Sebi circular stated.
“In case of prolong in checklist of the debt securities past 20 days from the deemed date of allotment, the company shall pay penal pastime of a minimum of 1% consistent with annum over the coupon price from the expiry of 30 days from the deemed date of allotment until the checklist of such debt securities to the investor,” it stated.
Industry players stated that now and then, if an organization delays servicing a bond, debenture trustees, who're required to act on behalf of the traders, don't disclose such delays. The new regulations will exchange such practices. However, they don't seem to be very positive how an organization, which is in default because of monetary difficulties, will be capable to pay the two% extra pastime.
“Defaults occur because of monetary difficulties and infrequently because of fraudulent behaviour at the part of the company. So, it’s tough to wager how an organization in monetary issue would organize to pay the two% extra pastime,” stated a number one fund supervisor. “Sebi’s intent is also just right, but I’m now not positive if this is feasible,” the fund supervisor stated.
Sebi tightens rules for companies listing bonds
![Sebi tightens rules for companies listing bonds]()
Reviewed by Kailash
on
May 29, 2019
Rating:
