SEBI Eyes Increased ISIN Limit for Private Debt to Boost Liquidity
By Market Desk
SEBI proposes raising the annual ISIN limit for privately placed debt from 14 to 17, aiming to ease liquidity and refinancing pressures for NBFCs and large corporations.
The Securities and Exchange Board of India (SEBI) has proposed increasing the annual limit for International Securities Identification Numbers (ISINs) for privately placed debt securities from 14 to 17. This significant adjustment aims to alleviate liquidity and refinancing pressures currently faced by Non-Banking Financial Companies (NBFCs) and large corporations.
Under the new proposed structure, the limit for plain-vanilla debt securities would rise to up to 12 ISINs, an increase from the previous nine. Additionally, up to five ISINs would be allocated for structured debt securities, market-linked debt, Floating Rate Bonds, Zero Coupon Bonds, and Debt Capital instruments.
Addressing Funding Challenges
Existing ISIN limits have been identified as a potential hindrance to NBFCs’ funding requirements. These restrictions complicated liquidity management and increased refinancing risks for these entities.
For large corporates, the current framework could impede their ability to fulfill regulatory mandates. These mandates require them to raise at least 25% of their qualified borrowings through debt securities.
Enhanced Flexibility in Issuance
To introduce greater flexibility, SEBI suggests allowing an additional ISIN once the total outstanding amount across the 12 ISINs maturing in a financial year reaches ₹15,000 crore. Furthermore, additional ISINs would be granted for every ₹3,000 crore thereafter.
The regulator also proposes excluding ISINs pertaining to Government of India-serviced/Extra Budgetary Resources bonds and ESG debt securities from these prescribed limits. This exclusion is designed to actively encourage their issuance in the market.
Streamlining Debt Listing Requirements
SEBI plans to remove the mandatory requirement for issuers to list all outstanding unlisted non-convertible debt securities issued on or after January 1, 2024, when they propose to list new ones. This change targets a reduction in costs and operational challenges for issuers, thereby promoting greater debt listing.
The market’s share of listed debt has seen a decline, and SEBI believes that the mandatory listing of past issues might be a contributing factor. It is important to note, however, that subsequent issuances after the first listing would still need to be listed.
Public feedback on these comprehensive proposals is currently invited, with the deadline set for August 31.