Large corporates are those that have an outstanding long-term borrowing of at least Rs 100 crore with a credit rating of ‘AA and above’ and have their debt securities listed on a stock exchange.
Under the new framework, Sebi has introduced incentives for large corporates in case of surplus in the requisite borrowings and moderated disincentives if they fail to raise at least 25 per cent of their incremental borrowings through debt securities.
In case of shortfall or surplus by way of issuance of debt securities, additional or lower contributions, respectively, to the core Settlement Guarantee Fund (SGF) of the Limited Purpose Clearing Corporation (LPCC) needs to be made by the LC, according to the circular.
Presently, if at the end of three years, there is a shortfall in the requisite borrowings, a monetary penalty of 0.2 per cent of the shortfall in the borrowed amount is levied.
To facilitate ease of compliance as well as ease of doing business, the regulator has retained the requirement that compliance with the framework will be met over a contiguous block of three years.
“From FY 2025 onwards, the requirement of mandatory qualified borrowing by an LC in an FY will be met over a contiguous block of three years,” Sebi said. Also, the market regulator has replaced the term “incremental borrowings” with “qualified borrowings”.
The framework will be applicable from April 1, 2024, for LCs following April-March as their financial year, while the same will be applicable from January 1, 2024, for LCs that follow January-December as their financial year.
In addition, Sebi said that large corporates will have to comply with the requirement of raising 25 per cent of their incremental borrowings done during financial years 2022, 2023, and 2024 respectively by way of issuance of debt securities till March 31, 2024, failing which such corporates will have to provide a one-time explanation in their annual report.
The new framework came after the board of Sebi last month approved a proposal to ease the norms for borrowings through the issuance of debt securities by large corporates.
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