The Securities and Exchange Board of India (Sebi) has revised the framework governing International Securities Identification Numbers (ISINs) for debt securities, increasing the maximum number from 14 to 17 per financial year. According to reports from Mint, the circular issued on 7 October allows up to 12 ISINs for plain-vanilla debt securities, with an additional 5 ISINs for structured debt securities, market-linked debt securities, floating-rate bonds, zero-coupon bonds, and Tier II bonds. An additional 6 ISINs remain available for capital gains tax bonds issued under Section 54EC of the Income Tax Act, 1961. The move follows representations from market participants who said that existing restrictions were affecting funding flexibility and increasing refinancing risks, particularly for non-banking financial companies (NBFCs).
The changes are expected to provide non-banking financial companies (NBFCs) greater flexibility to stagger repayments and align borrowing schedules with monthly cash flows from their loan portfolios. As reported by Mint, the increased allowance for plain-vanilla debt securities from 9 to 12 ISINs addresses the structural mismatch between limited maturity slots and the need to distribute repayments across the financial calendar. For lenders dependent on market borrowings, this could reduce the risk of refinancing large amounts of debt within short periods, with benefits extending to both large and smaller NBFCs. The revised framework may be particularly useful when market interest rates change between original issuance and refinancing dates, enabling NBFCs to reach investors willing to subscribe at prevailing market rates.
The earlier ISIN caps could force issuers to concentrate repayments within limited maturity windows, creating liability bunching that particularly challenges NBFCs. According to Mint, when substantial repayments fall due simultaneously, companies may face liquidity pressures and greater refinancing risk, creating difficulties in asset-liability management. The changes also address investor preferences, as bond investors often have specific maturity requirements and may prefer fresh issuances over participating in existing bond reissuances, particularly when refinancing at original coupons becomes difficult due to changed market rates. For instance, a bond issued two years ago at a coupon of 6.5% may need to be refinanced when current rates are closer to 8%. Such differences can make refinancing difficult for both issuers and investors.
NBFCs contributed 15.2% of total outstanding corporate bonds at end-September worth ₹61.52 trillion, raising ₹8.51 trillion in listed debt and ₹83,971.28 crore in unlisted debt. As reported by Mint, the revised framework may be particularly useful when market interest rates change between original issuance and refinancing dates, enabling NBFCs to reach investors willing to subscribe at prevailing market rates. The benefits depend on their funding mix, credit ratings, investor demand, and borrowing costs. The framework also protects certain existing instruments from unintended violations, with outstanding FRBs, ZCBs and Tier II bonds issued before the circular being grandfathered, though issuers cannot add fresh issuances in these categories if existing count reaches five or more maturities.
