TaxTMI 
TaxTMI 
Guarantee Scheme for Corporate Debt (GSCD) approved - Debt raised/ to be raised by Corporate Debt Market Development Fund (CDMDF) for the purpose of providing guarantee cover.
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....2. Purpose of the Scheme To provide 100% guarantee cover against debt raised/to be raised by CDMDF, an Alternative Investment Fund (AIF) created/ to be created under relevant SEBI Regulations, for the purpose of investing in corporate debt securities at times of market dislocation with a view to stabilize the markets. The guarantee shall cover debt raised, along with interest accrued and other bank charges thereon, and shall not exceed Rs.30,000 crore. The framework for CDMDF has been detailed in Annexure. 3. Date of commencement The scheme guidelines shall come into force from the date of issue of this Notification. 4. Duration of scheme The Scheme would be initially for a period of 15 years from the initial closing date of CDMDF, extendable at the discretion of the DEA in consultation with SEBI. 5. Definitions For the purposes of this Scheme - (i) "Backstop Facility" refers to the institutional framework being created to enable purchase of investment grade debt securities, particularly during market dislocation. (ii) "Corporate Debt Market Development Fund (CDMDF)" means an Alternative Investment Fund (AIF)....
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....vestors with residual maturity not exceeding 5 years; (v) CDMDF will offload a large part of its holdings within a reasonable time of 3 months from the end of market dislocation period. However, the timeline may be extended with the approval of SEBI Board. 8. Guarantee Issue and Monitoring Mechanism (i) The MLI, after due screening of the application of CDMDF, shall sanction the loan to CDMDF and enter the requisite details on NCGTC's portal designed for the said purpose. (ii) A Guarantee Number, based on preliminary screening by the portal and approval by NCGTC, shall be auto generated indicating the availability of guarantee on the said loans. (iii) Once the guarantee number is issued to MLI, the MLI shall enter the details of the loans disbursed to CDMDF on NCGTC's portal within two days of disbursement. (iv) CDMDF shall arrange to forward details of utilization of the loans on NCGTC's portal on a daily basis. (v) The authorized person of CDMDF shall enter the details of the sale of debt instruments on NCGTC's portal on the day of sale itself. (vi) The guarantee against the drawl....
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....n is outstanding; (vi) Ensure to provide statements and information as GFCD may require 14. Responsibilities of the MLIs under the Scheme (i) Payment of Guarantee fees to GFCD from time to time; (ii) Ensure to provide statements and information as GFCD may require; (iii) Comply with such directions as may be issued by GFCD from time to time with regard to the scheme guidelines. 15. Responsibilities of SEBI under the Scheme (i) Creation of CDMDF; (ii) Once the backstop facility is activated, i.e. market dislocation is declared, then SEBI will review its continuation internally and confidentially every fortnight. While making such reviews, the number of Watch Lists/ Alerts/ Triggers from the FSI during the fortnight would be factored in by SEBI; (iii) Comply with such other directions, regarding the operation of the Scheme, that DEA may provide to SEBI from time to time. 16. Management Committee of GFCD (i) There shall be a Management Committee (MC) constituted by the Department of Economic Affairs (DEA), Ministry of Finance to oversee the affairs of the Trust. (ii) The ....
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....to provide stability to the debt market during times of market dislocation. The proposed facility is envisaged to facilitate liquidity in the corporate debt market and to respond quickly in times of market dislocation, to achieve the following: (i) To build confidence of participants in the Corporate Bond Market. (ii) To bring liquidity and stability in the Corporate Bond Market. (iii) To address risk aversion during times of market dislocation including for securities rated below AAA, as a "Buyer of last resort". (iv) To ease redemption pressures in mutual fund schemes during times of market dislocation. (v) To facilitate liquidity for investors at large. 2. Proposed Mechanism of CDMDF 2.1 Structure and Tenure: (i) CDMDF would be set up as an Alternative Investment Fund (AIF) in the form of a Trust under SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations). (ii) CDMDF shall be launched as a closed-ended scheme with an initial tenure of 15 years from the date of its initial closing. Based on the requirements of the corporate bond market, the tenure can be extended w....
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....s and redemptions by unitholders of concerned MF scheme. 2.2 Activities: (i) In normal times, the CDMDF shall deal only in liquid and low-risk debt instruments such as low duration G-Secs, T-bills, Tri-party Repo on G-sec, AAA debt securities etc. using only its corpus. The Fund may also be permitted to undertake various activities related to corporate debt market including repo, Securities Lending and Borrowing Mechanism (SLBM), etc., as may be permitted by SEBI Board from time to time, subject to suitable risk management measures. (ii) In times of market dislocation, CDMDF shall purchase and hold eligible corporate debt securities from the participating investors and sell as markets recover. (iii) CDMDF will monitor the near normalcy of the market post market dislocation in consultation with SEBI and offload a large part of its holdings within a reasonable time of 3 months from the end of the market dislocation period. However, the above timeline may be extended with the approval of SEBI Board. (iv) The securities purchased by CDMDF need to have an investment grade credit rating and residual ....
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....ise two-third of Independent Directors. Of the remaining one-third, one member shall be nominated by AMFI. The activities of the Board of Trustees/ Trustee Company would be to approve governance standards and policies of the Investment Manager (IM) (i.e. SBI AMC) and monitor activities of the Fund and the IM. (iii) The role and responsibilities of trustees would be similar to the role and responsibilities assigned to trustees under SEBI (Mutual Funds) Regulations, 1996 (MF Regulations). An Audit Committee of the Board of Trustee shall be constituted, which shall review compliance with the provisions of Private Placement Memorandum (PPM) as required under AIF Regulations along with other responsibilities as may be specified. (iv) Any change in investment strategy of the CDMDF may only be with the prior approval of SEBI. 2.5.2. Governance Committee (GC): (i) GC will be appointed by the Investment Manager and shall comprise corporate bond market experts including academicians, CEOs or CIOs, risk management professionals, independent market experts, etc. (ii) All the policies of the Fund shall be jointl....
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....sp;decided by the SEBI Board and which can be extendable. (iv) Since SEBI Board has representatives from Department of Economic Affairs (DEA), Ministry of Corporate Affairs (MCA), Reserve Bank of India (RBI) and other independent professional, thus SEBI would be benefited from their perspectives at that time. (v) The market dislocation period may be considered to have ended, if no alert from the aforesaid model appears for a continuous period of 3 months. (vi) The activities of the fund during times of market dislocation shall be reported to the FSDC and the Government of India. 2.7 Mechanism of Borrowing based on Guarantee through NCGTC (i) The guarantee shall become operative upon trigger of bond market dislocation. Borrowing shall be drawn by the Fund as required, against the said Guarantee. (ii) At any point in time, guarantee will not exceed the specified amount of Rs. 30,000 Cr. (iii) Guarantee fee, as decided by the Government of India, shall be paid at the time of availing the guarantee facility on an annual basis on the outstanding loan amount daily pro rata. (iv) Over the tenur....
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....nbsp;distress price. (vi) The valuation of the portfolio by the Fund shall be governed by the existing norms on valuation as applicable under the extant MF Regulatory framework. The valuation policy shall be approved by the GC, Board of IM and Trustees. (vii) In case the rating of the debt securities forming part of the CDMDF portfolio is downgraded below investment grade, the same shall be reflected in daily NAV. 2.9 Moral Hazard Mitigation 2.9.1. Prudential Norms (i) The Fund shall not buy unlisted or below investment grade or defaulted debt securities or such securities in respect of which there is a material possibility of default or adverse credit news or views. (ii) Further, either a list of investment grade debt securities of eligible issuers shall be disclosed on the website of the IM or a transparent mechanism is to be followed for purchasing of debt securities of various issuers from specified mutual fund schemes. (iii) Prudential limits shall be as decided by the SEBI Board from time to time. To begin with the following would be the prudential limits: a. Single issuer limit-5% ....
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.... (i) The SEBI Board shall decide the trigger of debt market disruption warranting the Backstop Facility to operate in times of market dislocation and consequently the need for activation of guarantee by the NGCTC. Further, the period for which the Backstop Facility will be open shall also be as decided by the SEBI Board. (ii) CDMDF being an AIF will be regulated by SEBI under AIF Regulations. (iii) The Trustee Company shall be appointed by the SEBI Board. The directors of the Trustee Company shall be appointed with prior approval of SEBI. (iv) Change in investment strategy of CDMDF would only be with prior approval of SEBI. (v) CDMDF will monitor the near normalcy of the market post market dislocation in consultation with SEBI and offload a large part of its holdings within a reasonable time period of 3 months from the end of market dislocation period. However, the above timeline may be extended with the approval of SEBI Board. (vi) Periodic reporting (monthly basis) of the activities of the Fund to SEBI. Further, the activities of the Fund during times of market dislocation shall be reported to the SEBI Boa....