SEBI Introduces Liquidity Window to Boost Early Redemption of Debt Securities

Circular No. SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/141, Dated: 16.10.2024

SEBI has introduced a Liquidity Window facility for debt securities, allowing issuers to offer put options for investor redemption prior to the maturity date. This framework, governed by Regulation 15 of the SEBI (NCS) Regulations, 2021, aims to enhance liquidity in the corporate bond market, especially for retail investors. The Liquidity Window facility can be provided only for prospective issuances of debt securities through a public issue process or on a private placement basis.

The issuer must ensure that the Liquidity Window facility provided has the prior approval of its Board of Directors. The issuer must specify the eligibility of investors who can avail of the Liquidity Window facility, i.e. whether the facility shall be available to all investors in debt securities or only to retail investors in debt securities.

Further, the issuer must provide this facility only after the expiry of one year from the date of the issuance of the debt securities. Re-issuances must not be permitted under the ISINs in which the liquidity window facility is offered. The issuer may designate one of the stock exchanges as the ‘Designated Stock Exchange’ for the purpose of a liquidity window facility.

Also, the liquidity window must be kept open for 3 working days. The liquidity window may be operated on a monthly/quarterly basis at the discretion of the issuer. The schedule of the liquidity window must be disclosed upfront in the offer document. The circular shall be applicable on and from November 1, 2024.

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