Regulators of Debt Market

A Debt Market Presentation

Regulatory Aspects OfDebt Market In India

A Presentation by:

Shashank Udupa Manohar Rao

Ashutosh Athavale Parita Thakkar

Amar Vora Yash Thakkar

Purvi Visaria


Topics To Covered

Introduction to the Regulators of Debt Market

• Ashutosh Athavale

Government Securities Act, 2006

• Parita Thakkar

Government Securities Regulation Act, 2007

• Purvi Visaria

SEBI (Disclosure and Investor Protection) Guidelines, 2000

• Yash Thakkar, Amar Vora

SEBI (Issue and Listing of Debt Securities) Regulations, 2008

• Manohar Rao

Recent Data & Analysis, Conclusion

• Shashank Udupa


Ashutosh Athavale

Manohar Rao

Shashank Udupa

Amar Vora

Purvi Visaria

Parita Thakkar

Yash Thakkar


Introduction to the Regulators ofDebt Market

Debt Market In Depth..


RBI

Issuer Of Debt Instruments

Started the Banking Ombudsman Scheme.

Determines the investment of commercial

banks in debt.

Reserve Bank Of India


SEBI

To require the Stock Exchange to amend by

their laws.

Secondary Role In Regulatory Aspect

Determines the guidelines for raising

money through public issues

SEBI is also the main regulator for Mutual

Funds

Securities & Exchange Board of India


Government Securities Act, 2006

A security created and issued by the Government for the purpose

of raising a public loan..


Forms of Government Security

Promissory Note Bond Bearer Bond Stock Certificate

Constituents of Debt Market


Stock

Registered in the books of the RBI for which

a stock certificate is issued; or held at the

credit of the holder in the SGL account

including the CSGL account maintained in

the Books of the RBI

The transfer of the Government securities

shall be made in such form and in such

manner as may be prescribed.

A Government Security


FAQ

When did the G S Act and the G S Regulations come into force and to which

Government securities do they apply? The G S Act and the G S Regulations came into force with effect from December 1, 2007.

The G S Act applies to Government securities created and issued by the Central

Government or a State Government, whether before or after the commencement of this

Act. The G S Act will apply to all Government securities created and issued even prior to

December 1, 2007.

What does one mean by Government security in the form of Stock? Stock means a Government security registered in the books of RBI for which a Stock

Certificate (SC) is issued or which are held at the credit of the holder in the Subsidiary

General Ledger (SGL) account maintained in the books of RBI and transferable by

registration in the books of RBI.


Government Securities Regulations, 2007

Made by the Reserve Bank of India to carry out the purpose of the

Government Securities Act..


Regulations To The Different Forms

Government security held in the form of

Government Promissory Notes is transferable by

endorsement and delivery.

Government securities held in the form of A

Stock Certificate, SGL account including the

CSGL account & Bond Ledger Account are

transferable, before maturity, by execution of

forms - III, IV & V respectively appended to the

Government Securities Regulations.

Promissory notes and stock


Bond & SGL CSGL

A bearer bond is transferable by delivery and the person in possession

of the bond shall be deemed to be the owner of the bond.

Government securities held in SGL account including the CSGL account

or bond ledger account shall also be transferable by execution of a deed

in an electronic form under digital signature.

Bond and SGL CSGL


FAQ

Are Government securities eligible for creation of pledge,

hypothecation or lien? Yes. Pledge, hypothecation or lien may be created in respect of Government

securities held in the form of SC, BLA, SGL/CSGL and the holder of Government

securities in such forms may avail of loan facility by keeping such securities as

collateral towards loan. However, Government securities issued in the form of

GPN and bearer bonds are not eligible for creation of pledge, hypothecation or

lien.

Whether Government securities are eligible for conversion, consolidation, sub-

division, renewal? Yes. Government securities are eligible for conversion from one form of holding to another

as well as consolidation, sub-division and renewal as per the terms and conditions

prescribed in the G S Regulations.


SEBI (DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000

SEBI has issued Securities and Exchange Board of India (Disclosure

and Investor Protection) Guidelines in 2000 ..


Guidelines For Issue of Debt Instruments

The issuer making a public issue or rights issue of debt

securities shall appoint one or more debenture trustees in

accordance with the provisions of Section 117B of the

Companies Act, 1956.

The issuer making a public issue or rights issue of debt

securities shall appoint one or more Merchant Bankers.

The issuer shall enter into an arrangement with a depository

registered with the SEBI for dematerialization of the debt

securities that are proposed to be issued to the public.

The issuer shall give an option to the subscribers to receive

the debt securities either in the physical form or in

dematerialized form


Advertisements of Public Issues

The issuer company shall make an advertisement in an

English national Daily with wide circulation, one Hindi

National newspaper and a regional language

newspaper with wide circulation at the place where

the registered office of the issuer is situated

At the time of filing of the offer document with the

Registrar of Companies.

Issue Opening Date, Issue Closing Date.

And contain the minimum disclosures as per Schedule

IV.


Requirement of Credit Rating

No public issue or Rights issue shall be made unless

credit rating from a credit rating agency has been

obtained.

For a public or rights issue greater than or equal to

Rs. 100 crores two ratings from two different credit

rating agencies shall be obtained.

Where credit rating has been obtained from more

than one credit rating agencies, all credit ratings, shall

be disclosed.

All credit ratings obtained during the three years for

any listed security of the issuer company shall be

disclosed in the offer document.


Requirement Of Debenture Trustee

In case of issue of debentures having maturity more

than 18 months, the issuer shall appoint a Debenture

Trustee.

The name of the debenture trustee must be stated in

the offer document.

A trust deed must be executed by the issuer

company in favor of the trustee within six months of

the closure of the issue.

Trustees of the debenture issue shall be vested with

the power for protecting the interest of the

debenture holders.


Debenture Redemption Reserve (DRR)

A company has to create Debenture Redemption Reserve (DRR) in case

of issue of debentures with maturity of more than 18 months.

The DRR should be created in accordance with the following provisions:

• Company shall create DRR equivalent to 50% of the amount of

debenture issue before debenture redemption commences.

• Withdrawal from DRR is permitted only after 10% of the debenture

liability has been actually redeemed by the company.

• The requirement of creation of DRR shall not be applicable in case

of issue of debt instruments by infrastructure companies.


Distribution Of Dividends

In the case of existing issuers, prior permission of the lead

institution for declaring dividend exceeding 20% or as per

the loan covenants is necessary if the issuer does not

comply with institutional condition.

In case of New companies, distribution of dividend shall

require approval of the trustees to the issue and lead

institution, if any

Dividends may be distributed out of profit of particular years

only

If residual profits after transfer to debenture redemption

reserve are inadequate to distribute reasonable dividends,

issuer may distribute dividend out of general reserve.


Other Provisions

No company shall issue Fully Convertible Debentures having conversion

period of more than 36 months, unless conversion is made optional

with “Put” and “Call” option.

No issue of debentures by any issuer company shall be made for

acquisition of shares or providing loan.

Premium amount and time of conversion shall be determined by the

issuer company.

The interest rate for debentures can be freely determined by the issuer

company.


SEBI (ISSUE AND LISTING OF DEBT SECURITIES) REGULATIONS, 2008

Issue and Listing of Debt Securities was Implemented by SEBI & has

simplified the Debt market and given it structure..


Issue Requirements for Public Issues

Electronic Issuance.

Price Discovery through Book Building.

Minimum Subscription.

Listing of Debt Securities.


Continuous Listing Conditions:

Should comply with the conditions of listing.

Rating obtained by an issuer should be periodically reviewed.

Change in rating should be promptly disseminated to investors.

Debenture trustee should disclose the information to the investors and

the general public by issuing a press release.


Impact of Regulatory Changes


Impact On The Economy

India’s growth to 5.8 % in 2013 from 6% in 2012

Corporate debt outstanding which stood

at Rs. 7.9 trillion in June 2010, has grown to Rs.

12.9 trillion in March 2013.

NSE has grown from Rs.6.5 trillion in 00-01 to

Rs.61 trillion in 2011-12.

The government and the corporate sector

mobilized Rs. 78,51,973 million from the primary

debt market.


Future of India’s Debt Market

Regulations have had a positive impact on the market which has

moved from a credit market to a securities market..


The Future

RBI has started publishing SGL data.

Availability of information and increased

interest in the debt market – research reports,

seminars, discussions, newspaper articles, etc.

Encouragement for FDI.

Larger amounts being raised by the corporate

sector.


Acknowledgements

We would like the thank Mr. Abhijeet Sir for giving us an insight into the

Debt Market of our country which has helped us enormously to

understand the working of the Financial system in India.

Source: Wikipedia

• RBI

• Investopedia

Regulators of Debt Market

Economy & Finance

Transcript of Regulators of Debt Market