Representation to SEBI on Exemptions related to ISINs for Debt Securities

To,

Ms. Richa G. Agarwal

Deputy General Manager

Investment Management Department

Securities and Exchange Board of India

 

Sub: Representation on the exemptions related to International Securities Identification Number (ISINs) for debt securities issued under the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and clarity on initial reporting.

Ref: SEBI Circular No. CIR/IMD/DF-1/ 67/2017 (‘SEBI Circular’) issued on June 30, 2017.

Dear Madam,

Indian Securitisation Foundation (ISF)

ISF is a not-for-profit entity representing the securitisation industry in India. The membership of the Foundation includes banks, NBFCs, microfinance institutions, other issuers and investors and securitisation professionals for promoting interest of securitisation and fixed income securities in India. As ISF is dedicated to the cause of promoting securitisation, asset-based financing and related areas in India, we humbly submit our recommendations herein below on the captioned subject which may have significant impact on the intent of the circular.

1.    SEBI Circular

Para 2.2 of the SEBI Circular provides for exemption from applicability of ISINs. The text of the exemption is as follows:

2.2. Exemptions from applicability of ISINs:

The following classes of debt securities issued for raising regulatory capital are exempted from the applicability of provisions of this circular:

XX

Tier II bonds issued by Non-Systemically Important Non-Deposit taking Non-Banking Financial Company issued as per RBI “Master Direction-Non-Banking   Financial Company-Non-Systemically important Non-deposit taking Company (Reserve Bank) Directions, 2016”dated September 01, 2016. (Emphasis Supplied)

2.    NBFC-ND-SI Directions

Para 6 of the Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (‘NBFC-ND-SI Direction’) provides that every applicable NBFC shall maintain a minimum capital ratio consisting of Tier I and Tier II capital which shall not be less than 15 percent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items.

3.    NBFC-ND-NSI Directions

Para 46 and 48 of the Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (‘NBFC-ND-NSI Directions’) requires every NBFC-IFC (Non-Banking Finance Company – Infrastructure Finance Companies) and NBFC-MFI (Non-Banking Finance Company – Micro Finance Institutions), respectively, to maintain a minimum capital ratio consisting of Tier I and Tier II capital which shall not be less than 15 percent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet items.

4.    Our Representation

  • Including Tier-II bonds issued by NBFC-ND-SI in exemption category – Considering the provisions of law, following scenario emerges as far as applicability of capital adequacy is concerned:
  1. Applicable NBFCs as defined under para 2 of the NBFC-ND-SI Directions are required to comply with the capital to risk assets ratio thereby necessarily required to maintain tier-I and tier-II capital.
  2. NBFC-IFC-NSI and NBFC-MFI-NSI complying with the provisions of NBFC-ND-NSI Directions are required to with the capital to risk assets ratio thereby necessarily required to maintain tier-I and tier-II capital.
    1. Every other NBFC-ND-NSI is required to maintain a leverage ratio.

As evident from the text of the SEBI Circular, only those companies have been exempted from applicability of ISINs which issues debt securities for raising regulatory capital; however, it seems that the SEBI Circular have inadvertently missed adding NBFC-ND-SI within the exemption list.

Therefore, it is a humble request to consider including the following:

“2.2.8. Tier II bonds issued by Systemically Important Non-Deposit taking Non-Banking Financial Company issued as per RBI “Non-Banking Financial Company -Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016” dated September 01, 2016.”

  • Clarity with respect to initial reporting requirement – Para 3.1.1. of the SEBI Circular requires the issuer to submit the data in the format prescribed under the said para. The SEBI Circular does not specify to whom such data shall be submitted, i.e., to recognized stock exchange only or to recognized stock exchanges as well as a depository or to SEBI. In this regard, we request you to kindly clarify as to whom the submission shall be made.

Thanking you

For Indian Securitisation Foundation

Sd/-

(Vinod Kothari)

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