Stock Exchanges to Collect 0.5% Escrow on Debt Securities Issuance

Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/CIR/P/2023/56, dated: 13.04.2023

Earlier, SEBI in its board meeting held in September 2020, permitted the setting up of a Limited Purpose Clearing Corporation (LPCC) for clearing and settling repo transactions in debt securities.

The Bard had also decided that an amount of 0.5 basis points of the issuance value of debt securities per annum would be collected upfront before the listing of such securities to build the Settlement Guarantee Fund of the LPCC.

In this regard, AMC Repo Clearing Limited (ARCL) has been granted recognition as LPCC by SEBI. The Reserve Bank of India (RBI) also gave necessary approvals to ARCL to function as a Clearing Corporation with a limited purpose and to offer central counterparty services for repo transactions in debt securities.

Now, SEBI has introduced a new framework for the upfront collection of amounts as charges from eligible issuers at the time of allotment of debt securities.

Accordingly, SEBI has mandated the stock exchanges to collect an amount of 0.5 basis points of the issuance value of debt securities per annum based on its maturity and place it in an escrow account before the allotment of debt securities in case of public issue or private placement.

Further, the stock exchanges shall transfer the amounts so collected to the bank account of the LPCC within one working day of the receipt of the amount and inform the details of the same to the LPCC. Also, the details of amounts collected shall be disclosed by the stock exchanges on their websites.

The circular shall be effective for offer documents filed on or after 01.05.2023 for private placement/public issues of debt securities by such eligible issuers as specified by the LPCC.

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