Now Reading: SEBI proposes scrapping merchant banker mandate for small debt issues
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SEBI proposes scrapping merchant banker mandate for small debt issues
The Securities and Exchange Board of India has proposed exempting listed companies from the mandatory appointment of a merchant banker for small-value debt securities issued through private placement. The move aims to…
The Securities and Exchange Board of India has proposed exempting listed companies from the mandatory appointment of a merchant banker for small-value debt securities issued through private placement. The move aims to cut compliance costs and speed up price-sensitive issuances where market yields shift quickly.
Currently, issuers must appoint at least one merchant banker for private placements of debt or non-convertible preference shares with a face value of Rs 10,000. SEBI said the rule causes delays and that the limited number of merchant bankers active in debt is a hindrance.
The exemption applies only to issuers meeting strict criteria: they must be regulated by a financial sector regulator, listed for at least one year, free of pending penalties, and have no defaults on deposits, debt, dividends or term loans in the last three financial years. Public comments are invited by September 17.
Indian Opinion Analysis
SEBI's proposal mirrors its broader push to lower entry barriers in the corporate bond market, which remains dominated by bank loans and a handful of large issuers. The regulator's 2023 consultation paper had already flagged high intermediation costs as a drag on market depth. By exempting small-ticket private placements, SEBI is effectively betting that the due diligence done by stock exchanges and auditors is enough for low-risk, regulated issuers. The key test will be whether investor appetite grows without the merchant banker's certification, or if defaults rise. Comments close on 17 September, and a final circular is expected within three months after that.
Source: thehindubusinessline.com
This brief was synthesised by AI from the source linked above.
