Sebi lays down operational framework for transactions in default debt

Experts say the move can help mutual funds sell debt papers, which have defaulted to distressed funds

The Securities and Exchange Board of India (Sebi) on Tuesday laid down the operational framework to allow transactions in debt securities that have defaulted on maturity-linked payments.

Experts say the move can help mutual funds (MFs) sell debt papers, which have defaulted to distressed funds. “Enabling this could help develop a distressed market in India in the future. A distressed fund can be sold the stressed asset at marked-down valuations,” said a debt fund manager.

“Within two working days from the date of intimation from issuer or debenture trustee(s) that issuer has defaulted on its payment obligations, the depositories in