Finmin, RBI & Sebi to mull corp debt regulation

The finance ministry has convened a meeting of the two regulators - RBI and Sebi - to sort out the issue of regulations over the corporate debt market.

While there is no clarity on who would regulate the corporate debt market, the finance ministry is of the view that it should be governed by Sebi since it is part of securities, ministry sources said.

The RBI, on the other hand, may be entrusted with the regulation of reverse repo and repo as part of the corporate debt, they said.

Under the repo and reverse repo trade, a market participant pledges a corporate paper in exchange for funds for a specific period and at market determined rates.

The finance ministry would make efforts to prevail upon both the regulators to demarcate their areas with "mutual understanding" so that their responsibility and accountability could be fixed.

The meeting would try to clear the ambiguity arising out about the area of jurisdiction of RBI and Sebi under the Securities Contract Regulation Act (SCRA), they said.

Under Section 29 A of the SCRA, the central government could delegate powers to RBI along with Sebi to enable it to regulate such transactions under the Act as may be necessary. As such, the government, the Sebi and the RBI, depending on their jurisdiction, as may be mutually agreed upon, can exercise powers under the Act.

Also under Section 16 of the SCRA, RBI can also exercise powers to regulate ready forward contracts in bonds, debentures, debenture stock, securitised debt and other debt securities.