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SEBI is looking at standardisation in the corporate bond market in a big way on the lines of Government Securities (G-Secs) market.
Ashwani Bhatia, Whole Time Member (WTM), SEBI, said: “One reason why the G-Sec market is very liquid is the fact that coupon payments, the day count, among others, are standardised.
“...In case there is consensus there, we will not hesitate to standardise regulations [for corporate bond market].”
In the case of G-Sec, the coupon payment dates are half yearly (July 8 and January 8). If the coupon payment date falls on a Sunday or any other holiday, the coupon payment is made on the next working day. However, if the maturity date falls on a Sunday or a holiday, the redemption proceeds are paid on the previous working day.
In his address at Assocham’s corporate bond summit, Bhatia emphasised on the need to go down the rating scale as about 97 per cent of the bond issuances are from the top three rating categories — AAA, AA+ and AA.
“Compare this with the US, only 5 per cent of corporates are in the AAA and AA bucket, and about 75 per cent of the trading happens in the A, BBB, BB rating categories
“I think, this hangover also we should take out of our minds that only AAA and AA-rated bonds are safe. Bonds rated A, BBB, and others can also be safe. They run reasonably good business models,” said SEBI WTM.
Bhatia noted that the great health that the banking system is in today, actually doesn’t help the bond markets because the banking system’s credit keeps on growing.
“And as a result, most of the bond issuances are in the NBFC segment. So, we hardly get any issuances from manufacturing and other segments. Of course, it’s a big challenge. Let us see if we can do something about it,” he said.
Referring to almost 95 per cent of the bond issuances happening via private placements, the SEBI WTM said there is a need for more public issuances of bonds.
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