The Securities and Exchange Board of India has made efforts to deepens the corporate bond markets by asking them to raise at least a quarter of their incremental funds from the bond markets.

The proposal is to be implemented from 1 April next year and the large corporates identified as on 31 March 2019 will have to garner at least 25% of their borrowings made in 2019-20 through the bond market, SEBI said in a consultation paper.

This effort has made to reduce a concentration of risk on banks for financing corporates. Large corporate borrowings have contributed nearly 80% of the bad loans in the current cycle. To prevent a repeat of this in future years and to push for greater transparency in borrowings, regulators want corporates to borrow more from the bond markets.

‘Large Corporate’ term is used to define those who must have long-term borrowings of at least 100 crores and a credit rating of AA or above.

SEBI proposes a “comply or explain” framework for the new rules for the initial implementation of two years. In case of non-fulfillment requirement of market borrowing companies would need to disclose non-compliance as part of “continuous disclosure requirements,” the regulator said.

SEBI has sought comments from the public till 13 August on the proposal and a final framework would be put in place after taking views of the stakeholders.

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