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Sebi relaxes debt-equity conversion norms for banks

In a major fillip to banks struggling with bad loans, markets regulator Sebi on Sunday relaxed its norms for conversion of their debt into equity in companies that are in distress and unable to repay funds.

New Delhi: In a major fillip to banks struggling with bad loans, markets regulator Sebi on Sunday relaxed its norms for conversion of their debt into equity in companies that are in distress and unable to repay funds.

Under the relaxed norms, which were approved by Sebi's board today, the banks would be allowed to convert their debt into equity in a listed borrower entity that is in distress without applicability of the markets regulator's pricing formula in such conversions.

"Banks are facing a serious problem of non performing loans. There is urgent need for conversion of debt into equity, but the existing Sebi regulations with regard to pricing come in their way.

"So, we have eased the norms while providing certain safeguards, including by asking banks to acquire at least 51 per cent of equity," Sebi Chairman U K Sinha told reporters after the board meeting.

Sebi's board was also addressed by Finance Minister Arun Jaitley earlier in the morning.

In his first post-Budget meeting with Sebi's board, Jaitley reviewed the state of economy and the markets and discussed capacity building and other infrastructure needs for merger of commodities regulator FMC with the capital markets watchdog.

Jaitley was accompanied by Minister of State for Finance Jayant Sinha during his interaction with Sebi's board.

Besides Chairman Sinha, the 8-member Sebi board includes three Whole Time Members, an independent
director and nominees of Finance Ministry, Corporate Affairs Ministry and RBI.

After addressing the board of the Securities and Exchange Board of India (Sebi), Jaitley said he also discussed various issues confronting the regulator, its functioning vis-a-vis new proposals in the Budget and the roadmap ahead.

When asked about the merger of Forward Markets Commission (FMC) with Sebi, proposed by him in the Budget, Jaitley said this was also an issue of the discussion.

"They (Sebi) talked about capacity building at Sebi, both in terms of ability to acquaint with the subjects and other infrastructure requirements," the Finance Minister said after his customary post-Budget address to Sebi board.

"The convention is that I meet the Sebi board this time of the year. This is also the time to review the state of economy and the state of capital markets, issues which are confronting Sebi, their functioning vis-a-vis new proposals in the Budget and how we see the roadmap in coming months.

"These are subjects on which Sebi gave us a presentation and on basis of that we had interaction," Jaitley said.