The Securities and Exchange Board of India (SEBI) approved guidelines to govern international financial services centres (IFSC) at its board meeting here on Sunday.
Gujarat International Finance Tec-City (GIFT City), coming up near Ahmedabad, is expected to be the first such centre.
In a slew of reforms, the capital market regulator also paved the way for municipal bonds for infrastructure projects in urban areas. In addition, it revised the norms for conversion of the debt of a stressed listed company into equity by banks and financial institutions and tightened disclosure norms.
IFSC norms The new norms for IFSCs aim to ease the setting up of stock exchanges and capital market infrastructure in such centres. A stock exchange can be set up with ₹25 crore capital, against the normal requirement of ₹100 crore. However, this will have to be raised to ₹100 crore within three years.
Such exchanges will also be given three years to complete de-mutualisation. For a clearing corporation, the initial capital requirement will be ₹50 crore, against the norm of ₹300 crore, which will have to be achieved in three years.
SEBI Chairman UK Sinha said the new norms would help create vibrant capital market activities in such centres. This year’s Budget announced that GIFT City, the first such centre, would come up near Ahmedabad.
“An Indian stock exchange, recognised by us, or a foreign stock exchange recognised by the regulator in each country, is now eligible to set up a subsidiary,” Sinha told reporters.
The BSE and NSE have already indicated their willingness to set up an international exchange in GIFT City.
Municipal bonds To mobilise funds for 100 smart cities and other urban programmes, SEBI has set guidelines for municipal bodies to raise money from the market.
However, these will be applicable only for bonds issued to the public. Detailed safeguards — for instance, the issuer should not have a negative net worth and should have an investment grade rating — have also been prescribed.
The money mobilised should be for a specified project, and the revenue generated should be credited into an escrow account.
Also, a monitoring agency will inform the public and investors from time to time on how the bonds are being serviced.
“With this regulation, large institutional investors, such as pension funds, insurance companies or even foreign pension funds, who are at the moment a little shy about making investments, will get the desired comfort,” Sinha said, adding that these bonds will be tradable on stock exchanges. Such bonds, known as ‘Muni Bonds’, are popular abroad.
Disclosure norms A listed firm will now have to disclose its board decisions within 30 minutes, while all other ‘material information’ will need to be made public within 24 hours. Non-compliance will invite strong penal action.
SEBI said information, including details about material events, will need to be compulsorily disclosed through stock exchanges for the benefit of investors.
Companies will also have to provide “specific and adequate replies” to queries with respect to rumours and media reports.
SEBI is strictly monitoring compliance with disclosure or listing guidelines, and this is now being converted into regulations, he added.