SEBI's new reforms to help identify charge in NBFC defaults
PrintListen to this Article
In a new consultation paper, the Securities and Exchange Board of India (Sebi) has proposed a detailed review of the regulatory framework for Corporate Bonds and Debenture Trustees (DTs).
As per the consultation paper, non-banking financial companies (NBFCs) will now be required to create an identified charge on the assets, as the pari-passu floating charge in case of recent defaults of NBFCs in secured loans has created confusion as to whether the debentures are really secured.
According to the regulator, creation of an identified charge by NBFCs will enable liquidation of asset and return of debt quickly to the investors in the event of any default.
Recently, in the case of Reliance Capital, two trustees representing secured lenders had moved the court claiming rights on the same assets. The assets were charged to one trustee as part of the balance sheet and pledged to other trustee also.
"Sebi's new proposal will help avoid such situations in future and also help identify the charge, especially in case of default or liquidation. This would also expedite further borrowings by NBFCs by obviating the need of obtaining NOCs from existing lender," said an official with a debenture trustee.
Some market players have expressed apprehension as to whether the new form of charge creation would apply to existing debentures or future borrowing.
On this, a market expert said, "Apparently, it seems that it would be applicable only on future borrowings so as to avoid operational difficulties."
Sebi has also proposed a transition time of 3-5 years, keeping in mind that the existing charge created over the entire balance sheet would continue till the maturity of already issued debentures, which is mostly between 3-5 years.
Market experts also feel that the creation of an identified charge on the balance sheet will not cause any problem to the existing investors as the issuers would ensure that their asset cover is more than 100 per cent.
"Creation of identified charge is also different from securitisation where the amount from the underlying is ring-fenced in an escrow account and has to flow back to the investors," an intermediary said.
Sebi has further proposed creation of a recovery fund by the issuer at the time of issuance of security. This is aimed at mitigating the problem of delay in receipt of funds to the debenture trustees and ensure an accelerated enforcement of security.
"Sebi's new proposal will help bring back the confidence of investors in the bond market," said another expert.
The consultation paper is open for comments till March 17, 2020. #casansaar (Source - PTI BusinessToday Website)
Category : SEBI | Comments : 0 | Hits : 511
A financial influencer, also known as finfluencer, who was also involved in imparting training related to stock market trading has been asked to part with a little over ?12 crore, which it made unlawfully. The funds are to be credited or deposited by Ravindra Balu Bharti into an interest-bearing escrow account that has been set up in a nationalised bank especially for that purpose. The regulator stated in an order that the escrow account(s) would establish a lien in favour of SEBI and that th...
The Securities and Exchange Board of India (Sebi), the country's market regulator, has announced the launch of an optional same-day (T+0) settlement cycle for a select group of 25 stocks starting March 28, as per a circular published on its website last Thursday. This new initiative, referred to as the beta version, is set to coexist with the traditional next-day (T+1) settlement cycle, where trades are settled within 24 hours of execution. The T+0 settlement option will be available for ...
Capital markets regulator Sebi on Thursday slapped a fine of Rs 48 lakh on eight entities, including promoters of United Polyfab Gujarat Ltd (UPGL), for manipulating the share prices of the company. These entities have to pay the penalty jointly and severally within 45 days, as per an order. The order came after Sebi conducted an investigation of UPGL and trading by certain entities in the scrip of the company, to ascertain whether there was any violation of the provisions of the PFUTP (Pr...
Sebi alerts investors about the growing trend of unregistered entities falsely claiming Sebi registration and offering unrealistic returns. Investors are advised to verify the registration status and consider the inherent risks associated with high-return investments. The Securities and Exchange Board of India (Sebi) has issued a warning to investors, cautioning them against investing money with unregistered entities that promise assured or exceptionally high returns on investments. This advi...
Capital markets regulator Sebi on Thursday issued orders of action against 15 guest experts of the Zee Business channel for unlawful trading. The entities made unlawful gains to the tune of Rs. 7.41 crore from such trades and the profit was shared with guest experts as per prior understanding, Sebi noted. The market regulator also asked the guest experts to pay Rs.7.41 crore. The guest experts appeared on the Zee Business channel from 1 February 2022 and 31 December 2022. "The facts of t...
Comments