CIRCULAR
SEBI/HO/DDHS/DDHS-RACPOD1/CIR/P/2023/56 April 13, 2023
To
All eligible issuers1 of debt securities
Recognized Limited Purpose Clearing Corporations
Recognized Stock Exchanges
Registered Depositories
Madam/Sir,
Sub: Contribution by eligible Issuers of debt securities to the Settlement
Guarantee Fund of the Limited Purpose Clearing Corporation for repo
transactions in debt securities
1. A well-functioning repo market contributes to the development of the debt securities
market, inter alia, by way of boosting the liquidity of the underlying debt securities
and providing a facility to market participants to monetize their debt holdings without
selling the underlying, thus meeting their temporary need for funds. The
development of an active repo market in debt securities may also be beneficial to
the Issuers as the enhanced liquidity may positively impact the yield, thereby
resulting in reduced costs of raising funds to the issuers in the primary market.
2. The SEBI Board in its meeting held on September 29, 2020 permitted the setting up
a Limited Purpose Clearing Corporation (LPCC) for clearing and settling repo
transactions in debt securities. The Board, inter alia, also decided that an amount of
1 To be specified by the Limited Purpose Clearing Corporation
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0.5 basis points of the issuance value of debt securities per annum be collected
upfront prior to the listing of such securities in order to build the Settlement
Guarantee Fund of the LPCC.
3. In this regard, AMC Repo Clearing Limited (ARCL) has been granted recognition as
LPCC by SEBI. The Reserve Bank of India also accorded necessary approvals to
ARCL to function as a Clearing Corporation with a limited purpose and to offer
central counter party services for repo transactions in debt securities.
4. It has been decided to put in place, the following framework for upfront collection of
amounts as charges from eligible issuers at the time of allotment of debt securities:
a. The eligible issuers shall be notified by the LPCC as per its risk management
policy.
b. An amount of 0.5 basis points of the issuance value of debt securities per annum
based on the maturity of debt securities shall be collected by the Stock
Exchanges and placed in an escrow account prior to the allotment of the debt
securities. This amount is applicable on a public issue or private placement of
debt securities under the SEBI (Issue and Listing of Non-convertible Securities)
Regulations, 2021.
c. 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.
d. The details of the amounts so collected shall also be disclosed by the Stock
Exchanges on their websites.
e. The above mentioned charges shall be collected on the basis of Actual/ Actual.
The LPCC shall provide an illustration of the calculation of the amounts to be
contributed by the eligible issuers.
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5. The provisions of this circular shall come into force for the offer documents filed on
or after May 01, 2023, for private placement/ public issues of debt securities by such
eligible issuers as specified by the LPCC. As mentioned earlier, the LPCC shall issue
a circular accordingly to operationalise the same.
6. This circular is issued in exercise of powers under Section 11(1) of the Securities
and Exchange Board of India Act, 1992 to protect the interests of investors in
securities and to promote the development of, and to regulate the securities markets
read with Regulation 55(1) of SEBI (Issue and Listing of Non-convertible securities)
Regulations, 2021.
7. This Circular is available on SEBI website at www.sebi.gov.in under the categories
‘Circulars’ under ‘Legal Framework’.
Yours faithfully,
Pradeep Ramakrishnan
General Manager
Department of Debt and Hybrid Securities
Tel No.: 022-2644 9246
Email ID: pradeepr@sebi.gov.in
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