Homelegal News

SEBI accuses CREDAI of “proxy” litigation for NBFCs, says MFs own over Rs 2 trln of NCDs

SEBI accuses CREDAI of “proxy” litigation for NBFCs, says MFs own over Rs 2 trln of NCDs

SEBI accuses CREDAI of “proxy” litigation for NBFCs, says MFs own over Rs 2 trln of NCDs
Profile image

By Ashmit Kumar  Jun 11, 2020 6:28:57 AM IST (Updated)

Markets regulator SEBI has snubbed real estate developers association CREDAI, saying it had no right to seek relief for non-banking finance companies.

Markets regulator SEBI has snubbed real estate developers association CREDAI, saying it had no right to seek relief for non-banking finance companies.

Recommended Articles

View All

CREDAI has filed a plea in court, seeking relief for NBFCs on interest payment obligations towards holders of Non-Convertible Debentures (NCDs) issued by the NBFCs. In its reply, the regulator said that mutual funds (MFs) owned over Rs 200,000 crore (Rs 2 trillion) worth of NCDs issued by NBFCs and Housing Finance Companies (HFCs).
Accusing CREDAI of “proxy litigation”, SEBI asked the developer body why it was more concerned about NBFCs than about its own members. SEBI has called CREDAI’s plea as false, frivolous, misconceived, non- maintainable and sought that it be dismissed.
SEBI said any exemption or deferral for NBFCs on servicing NCD dues could cause chaos and havoc, as it would impact lakhs of retail investors in the mutual funds.
SEBI's reply was in response to the plea filed by CREDAI’s Haryana Chapter. In the plea, CREDAI had red-flagged liquidity concerns about NBFCs, claiming that they were unable to recover dues from borrowers while having to make payments to the NCD holders. Similar concerns were raised by Indiabulls Housing Finance in the Delhi High Court, seeking relief on payment of NCD dues. The company later withdrew is the plea. CREDAI, in its plea, had pitched for a 6-month-freeze on repayment of any commercial paper, bonds, or non-convertible debentures.
Dismissing the possibility of suspension of all liabilities for 6 months, SEBI has argued that any such direction from the SC will bring the economy to a standstill, leading to disorder and havoc.
SEBI has also pointed out that the pain of the economic crisis is being felt across sectors, and is not unique to the real estate sector. Citing the Rs 20 lakh relief package from the government, SEBI argued that various measures have been launched targeted at specific sectors. SEBI said that the real estate sector had also received various reliefs such as no exemption for homebuyers from making payments, deferral of March GST payments, extended timelines for project completions, relaxation of labor laws, and relief on account of PF payments.
SEBI also pointed out that NBFCs have also received a liquidity pipeline from the RBI as well as policy support from the government. In the form of a partial credit guarantee scheme.
The regulator’s reply also argued that it was not fair to say that all NBFCs were suffering from a liquidity crunch. Sebi pointed out how Indiabulls Housing Finance had challenged a rating downgrade, in Delhi HC, claiming "on-book liquidity" of Rs 16,567 crore as of December 2019.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!