SEBI approves IFSC guidelines for setting up GIFT city, issuance of municipal bonds
SHISHIR SINHAMarket regulator, Securities and Exchange Board of India (SEBI) has approved guidelines for setting up Gujarat International Finance Tec-City (GIFT) beside paving the way for issuance of Municipal Bonds for development of infrastructure in urban areas.
SEBI Board met here on Sunday to take these decisions which also included revising norms for conversion of debt of a stressed company into equity by Banks and Financial Institutions. Earlier, Finance Minister Arun Jaitley addressed the board in customary post budget meeting.
SEBI Chairman U K Sinha said that the board cleared SEBI (International Financial Services Centers) Guidelines to facilitate and regulate financial services relating to securities market in a kind of Financial Special Economic Zone. This new set up will allow international and domestic stock exchanges to start a subsidiary here. Foreign companies will also be allowed to raise money in dollar here.
In his budget speech, Jaitley had said: "While India produces some of the finest financial minds, including in international finance, they have few avenues in India to fully exhibit and exploit their strength to the country's advantage. GIFT in Gujarat was envisaged as International Finance Centre that would actually become as good an International Finance Centre as Singapore or Dubai, which, incidentally, are largely manned by Indians. The proposal has languished for years. I am glad to announce that the first phase of GIFT will soon become a reality
Municipal Bond
Sinha informed that the board has also cleared guidelines for Municipal Bonds. "This will be an additional instrument to raise money for growing urban infrastructure. We expect foreign funds and pension funds to invest besides other investors," he said while adding that these bonds will be tradeble on stock exchanges providing easy exit.
He also mentioned that there are enough safeguards such as no negative net worth, project specific and deposit of mobilized money in escrow account beside others. "By 2020, urban population is expected to reach 68 crore. This will require more and more money for urban infrastructure and new instrument is expected to help in this regard," Sinha said while adding that it is very popular in various countries.
Conversion of debt into equity
The market regulator also revised the pricing formula for conversion of debt of a stressed company into equity by lending banks and financial institutions. "Pricing formula for conversion will not be applied. In stead, fair value formulae will be used. Fair value will not be below the face value of the share," Sinha said.
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