Sebi flexes norms to attract FIIs

FIIs to get government securities and corporate bonds as collaterals for trading on the country’s stock exchanges

GN Bureau | March 21, 2013



To accelerate the flow of funds from foreign institutional investors (FII), the Securities and Exchange Board of India on Wednesday gave a green signal to them to offer government securities and corporate bonds as collaterals for trading on the country’s stock exchanges.

According to a circular issued by the securities regulator, “FIIs are permitted to offer the following collaterals - government securities, corporate bonds, cash and foreign sovereign securities with AAA ratings, for their transactions in both cash and F&O (futures and options) segments.”

Experts have welcomed the regulator’s move saying that it would make the Indian market more attractive. “This move by SEBI will facilitate more depth and liquidity in the Indian capital market as earlier FII’s had to block these funds into these margin deposits which did not fetch them any revenue or interest. Now, they can use these funds to buy corporate bonds or government securities which will give them returns in the form of interest and also capital appreciation and the same can also be used by them as collateral against their margin deposit in capital markets,” D K Aggarwal, chairman & managing director, SMC Investments and Advisors Ltd) told Governance Now.

Aggarwal, however, added that easing of these norms alone was not enough and that the government and other bodies needed to take other measures and ensure their effective implementation to make Indian markets more lucrative. “This move is not enough and to improve investor sentiments, KYC simplification and more tax friendly measures related to FII & QFI instruments into India should be done. Apart from this, the reforms process adopted by government has to be continued and various bottlenecks which arise in the implementation process should be removed.”

Till last month, FIIs have invested over Rs 39,000 crore in the Indian stocks markets. The union finance minister P Chidambaram in his Budget 2013-2014 speech had emphasized on the need to make the economic environment more investor-friendly. He had proposed to permit FIIs to offer their investments in corporate bonds and government securities as collateral for trading in the Indian stock markets.  

Initially, FIIs were allowed to offer, as collateral, cash and foreign sovereign securities with 'AAA' rating in the derivatives market, while foreign sovereign securities with ‘AAA’ rating and government securities were permitted in the cash segment.

However, according to the new norms, Sebi has directed clearing corporations to provide acceptance to only those corporate bonds as collateral that “have a rating of AA or above (or with similar rating nomenclature) by recognised credit rating agencies.”

In addition, these bonds have to be in dematerialised form. “The bonds shall be treated as part of the non-cash component of the liquid assets of the clearing member and shall not exceed 10 percent of the total liquid assets of the clearing member,” the circular further read.

Comments

 

Other News

Development paradox: Falling poverty miracle and an inequality problem

India’s reduction in poverty over the past decade is a development achievement of considerable significance. The World Bank’s April 2026 ‘India Development Update’ estimates that the share of Indians living below the international extreme-poverty line of $3.00 per person per day i

In Arunachal, a river we call mother

In Arunachal Pradesh, the Siang is not just a river. For many of us, especially the Adi people, it is part of our family. Our grandparents fished in it. Children learned to swim in it. Our farms drink from it. When someone says a huge dam will be built on it, we do not hear the word "project".

A new retelling of the Mahabharata delves into key moments

In a time when every decision carries consequences and questions of ambition, power, loyalty, identity and moral choice continue to shape our lives, Dr. Arun Krishnan’s new book, ‘Mahakshana’ (Penguin India) offers a strikingly relevant retelling of the Mahabharata.  

Cabinet approves viability gap funding to develop grid-scale energy storage systems

The Union Cabinet, chaired by PM Narendra Modi, has approved the Viability Gap Funding (VGF) Scheme for Development of Grid-Scale Energy Storage Systems, with a total financial support of Rs.14,500 crore for the period FY 2026-27 to FY 2030-31. The scheme aims to support the development o

Cabinet creates a pathway to absorb Agniveers in Defence Forces

An objective assessment in terms of organisational requirements and operational efficiency has brought out the outstanding performance of Agniveers in terms of skills, motivation levels, physical fitness and technological prowess. As envisaged earlier, based on merit, 25% of Agniveers will be offered reg

Modi inaugurates, lays foundation stone of Pune Metro projects

Prime minister Narendra Modi inaugurated and laid the foundation stone for Pune Metro projects worth around ₹21,800 crore on Tuesday through video conferencing. Addressing the gathering on the occasion, the PM extended warm Diwali greetings to the people of Pune and Maharashtra and remarked that f

Upcoming Conferences



-->

Archives

Current Issue

Opinion

Facebook Twitter Google Plus Linkedin Subscribe Newsletter

Twitter