New Delhi: The Securities and Exchange Board of India (Sebi) has proposed increasing the threshold for identifying ‘Large Corporates’ (LC) from the current Rs 100 crore to at least Rs 500 crore for outstanding long-term borrowings. The proposal also suggests removing the requirement of credit rating and eliminating penal provisions for non-compliance with the borrowings rule. Sebi has mandated that large corporates meet one-fourth of their financing needs from the debt market to deepen the bond market. Public comments on the proposals can be submitted until August 31. The regulator has also proposed replacing the term “incremental borrowings” with “qualified borrowings”. Sebi has suggested replacing the penalty for failure to meet the 25% borrowing requirement with additional or lower contributions to the core Settlement Guarantee Fund (SGF) of the Limited Purpose Clearing Corporation (LPCC) made by the LC. Currently, a monetary penalty of 0.2% of the shortfall in the borrowed amount is levied if there is a deficit in the requisite borrowings at the end of three years. The proposal also recommends making the requirement of a specified level of borrowing applicable on an annual basis to simplify the computation process. Currently, the mandatory borrowing by an LC must be met over a contiguous block of three years starting from FY2022.
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