India Markets Regulator Opposes Plea to Suspend Debt Payments
The logo of Securities and Exchange Board of India (SEBI) is pictured on the door handle of a corference room at the market regulator hearquarters in Mumbai, India. (Photo: BloombergQuint)

India Markets Regulator Opposes Plea to Suspend Debt Payments

(Bloomberg) -- India’s capital markets regulator has opposed a petition to freeze debt repayments, including those on bond borrowings, according to people with knowledge of the matter.

Securities and Exchange Board of India has urged the Supreme Court to dismiss the petition by the Confederation of Real Estate Developers’ Associations of India, the people said, asking not to be identified as Sebi’s filing isn’t public. The builders’ body had sought a pause on loan repayments along with accruing interest, and a six-month freeze on all repayments for securities such as commercial paper and bonds.

Sebi, which regulates some financial instruments such as listed non-convertible debentures, said any such freeze may push mutual funds -- which hold $128 billion of the securities -- to dishonor redemption requests from their investors.

Stress in India’s credit markets worsened during a two-month lockdown that halted almost all economic activity to stop the spread of the coronavirus. Franklin Templeton’s local unit in April suspended six of its debt mutual funds, worth $4.1 billion, and has said it may take over five years for some investors to recoup their money.

Sebi Says:

  • Mutual funds held 9.66 trillion rupees ($128 billion) in money market and debt securities as of April 30
    • Of this, 3.68 trillion rupees matures before August
  • Another 32.53 trillion rupees of non-convertible debentures are held by investors other than mutual funds
  • Sebi cites a valuator’s report, the people said

The real estate body had petitioned the Supreme Court last month, seeking protection from any coercive action on non-payment of dues and rating downgrades. The next hearing is scheduled for Friday.

An email to SEBI’s spokesperson was unanswered.

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