Sebi to push corporate bond sales online in market overhaul

The Securities and Exchange Board of India (Sebi) plans to overhaul the corporate debt market by pushing all issuance onto an electronic platform as early as November, sources with direct knowledge of the plan told Reuters, in a bid to boost market activity Stock Market Trading Tips  

The markets regulator will announce the proposal drafted by an internal regulatory panel within a few weeks, and seek market feedback, said the sources, who declined to be named as the plan is not yet public  

India would be among the first countries to move online, one of the sources said, in a radical shift that comes after investors called for increased supervision of a $225 billion market dominated by a handful of heavyweight issuers.

That would fit the government's goal of bringing in new sources of cash and fostering cheaper credit to help companies invest, at a time when the economy is still struggling to take off despite lofty official growth numbers     Himanshu Tiwari Astrologer Blog
Banks, the most common source of cash for many Indian firms, are burdened with $50 billion of bad debt.

"Transparency is the most important factor which is driving the need to move the private issuance market to an electronic platform," one of the sources said.

"Currently one doesn't really know what is going on, how the arrangers solicit deals."

When contacted by Reuters, Sebi did not immediately provide comment.

Almost 90 per cent of corporate bond issuances in India are in effect private placements. Issuers hire investment banks to find buyers, much like how debt is sold in many other countries.

Under this system, Sebi has little scope to oversee sales, and investors complain issuers cancel deals even when they have been announced, if the price is unfavourable.

But the move is meeting stiff resistance from investment bankers, who fear they would see commissions — already very low in India — reduced further, even though they would still likely play a role in marketing the new debt to investors    Stock Market Trading Tips

"It would be better if they allow both OTC and electronic placements, and then we can gradually shift to only the electronic platform," said the head of a foreign bank in Mumbai. "Otherwise bankers will lose interest."