BANGALORE: The Securities and Exchange Board of India has approved the framework to set up new International Financial Services Center (IFSC), as well as approvedthe regulations for municipalities to issue and list bonds.

 It has also relaxed the frameworks surrounding loans to companies; banks can now convert non-performing loans to equity in a particular company. The new policies were made public by the SEBI after a meeting of its board, which was addressed by Finance Minister Arun Jaitley prior to the announcement.

Framework for MUNIs

SEBI has cleared the new regulatory framework for municipalities to issue and list debt securities. This move is designed to promote public infrastructure, as households as well as financial services firms can now invest their savings in municipal projects.

The revenue from these projects will have to be kept in escrow accounts, and municipalities will only be allowed to issue bonds if they have clean financial track records, and have not defaulted in repayments of debt securities or loans in the past 365 days.

The framework also prohibits general obligation bonds, where money is repaid through taxation or project revenue from being sold to the public.

Conversion of debt into equity by banks

Banks will now be able to convert loans to a publicly listed company in financial turmoil into equity. They will be able to do this without following the market regulator’s pricing formula. The relaxed rules will help banks as well as companies, and safeguards are present to avoid disastrous situations.

"Banks are facing a serious problem of non-performing loans. There is an urgent need for conversion of debt into equity, but the existing Sebi regulations with regard to pricing come in their way. So, we have eased the norms while providing certain safeguards, including asking banks to acquire at least 51 percent of equity," said SEBI chairman UK Sinha.

Tighter disclosure norms

Listed companies will have to inform the public after every board meeting within half an hour after its completion. They will also have to publicly announce all important events and information within 24 hours.

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