SEBI Plans Rules For Uniform Pricing Of Bonds

To deepen the corporate bond market, regulator SEBI plans to come out with a methodology for uniform valuation of such products across the financial sector, said officials.

The Securities and Exchange Board of India is closely working with the Reserve Bank of India in this regard.

According to officials, the market regulator will come out with the framework for ‘one single price’ of corporate bonds across the financial sector next month after the Union Budget. It will make uniform rules for calculation of interest and redemption payments on bonds.

Currently, different sectors follow different conventions and divergent practices for holidays or day count, which leads to varying basis for yield calculation.

SEBI has already set up a separate division to develop bond markets and increase retail participation. Further, the move will provide additional avenues to corporates for raising funds in a cost effective manner and reducing reliance on bank finance.

Besides, a deep and liquid debt market augments financial savings and helps match the savers to the borrowers in an efficient manner, they added.

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A bond is defined as a debt instrument that provides a periodic stream of interest payments to investors while repaying the principal sum on a specified maturity date. The bond’s price equals the present value of its expected future cash flows.

SEBI has been taking a slew of measures to deepen the bond market. This includes allowing foreign portfolio investors (FPIs) to invest in unlisted corporate debt securities as well as putting in place a new framework for consolidation in debt securities.