Expansion of QIB definition proposed

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The Securities and Exchange Board of India (SEBI) has proposed to broaden the definition of qualified institutional buyer (QIB) for investing in debt securities.

According to the stock exchange regulator, the move will encourage participation from a wider range of investors, bolster the bond market, and promote transparency and accountability in the debt securities space.

The move also aims to increase the availability of funds to issuers of such securities. As per the SEBI’s suggestion, certain categories of investors should be added to the QIB segment.

This includes SEBI-regulated entities, multi-state co-operatives with a net worth exceeding INR5 billion (USD60.5 million), pension funds, banking financial companies, housing finance companies, small finance banks, reinsurance companies, refinancing agencies and universities.

The SEBI’s consultation paper highlights that expanding the definition of QIB would expand the potential investor base for debt securities issuers and further develop the debt markets. The regulator is seeking public comments on the proposals by 29 May.

The SEBI also notes the need for parity between certain categories of Indian investors and foreign portfolio investors (FPIs), who are currently included in the QIB definition.

Recognising that QIBs play a vital role in the debt securities market, the SEBI asserts that expanding the definition for investing in debt securities will broaden the range of investors, improve access to investment opportunities through electronic debt bidding platforms, and create a level playing field within the bond market.

Under the proposed framework, an entity seeking QIB status will be required to provide self-certification, stating that it possesses the necessary expertise and skills to evaluate debt securities investments, conduct risk management, and perform due diligence.

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