In a recent development, the Securities and Exchange Board of India (SEBI) has approved a proposal aimed at providing greater flexibility to large corporates (LCs) in fulfilling their incremental financing needs through debt securities issuance. The move is expected to streamline the borrowing process and enhance the ease of doing business for large enterprises.
SEBI’s decision, made during a board meeting, includes several key measures designed to offer more flexibility within the existing LC framework. This initiative follows the issuance of a consultation paper in August, titled ‘Review of framework for borrowings by Large Corporates’.
One notable change is the adjustment of the monetary threshold for defining LCs. The previous threshold for identifying LCs was set at outstanding long-term borrowings of Rs 100 crore or more. However, SEBI’s new decision raises this threshold to Rs 500 crore or more. By doing so, the number of entities classified as LCs will be reduced, potentially benefiting a broader range of businesses.
Furthermore, SEBI’s board eliminated penalties for LCs unable to raise a specific percentage of their incremental borrowing from the debt market. Under the previous norms, large companies were required to source 25 percent of their incremental borrowing through debt securities issuance. Failure to comply with this rule incurred a monetary penalty of 0.2 percent of the shortfall in the borrowed amount.
To encourage and incentivize the issuance of debt securities to meet funding needs, SEBI introduced measures that seek to balance incentives and disincentives effectively.
In a bid to simplify compliance and enhance the ease of doing business, SEBI has retained the requirement that compliance with the framework must be met over a continuous block of three years.
Additionally, SEBI addressed the framework for the credit of unclaimed investor funds in listed entities other than companies, Real Estate Investment Trusts (REITs), and Infrastructure Investment Trusts (InvITs) to the Investor Protection and Education Fund (IPEF). Investors can now approach the respective debt listed entity, REIT, or InvIT to claim their unclaimed amounts, ensuring a smoother and less disruptive process for investors.
Finally, SEBI extended the compliance timeline for enhanced qualification and experience requirements for Investment Advisers, granting them until September 30, 2025, to meet these requirements. This decision comes after receiving representations from stakeholders and considering the evolving landscape of investment advice.
SEBI’s recent measures aim to enhance the flexibility and ease of borrowing for large corporates, while also addressing the needs of investors and investment advisers, reflecting a commitment to a dynamic and responsive regulatory environment.
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