The Securities and Exchange Board of India will clarify this week that listed companies issuing bonds will have to list their securities prospectively.
This will clear a fortnight's uncertainty. About Rs 160,000 crore (Rs 1,600 billion) in debt is estimated to have become illiquid as a result of a Sebi circular issued on September 30.
The corporate bond market has interpreted the regulator's decision as implying that nearly 80 per cent of the bonds in the market cannot be sold because they are not listed.
The National Stock Exchange further complicated matters by issuing a circular to its members, stating that debt securities "shall be admitted for dealings on the exchange only under the listed category".
It also said members could trade and issue contract notes only in securities that were available for trading on the NSE's wholesale debt market segment.
Last week, the RBI issued a circular retaining the 20 per cent ceiling on banks' investment in unlisted bonds, but made this applicable to prospective investments.
Sebi's clarification on the listing of privately-placed debt may allow companies 3-6 months to list their outstanding stock of bonds and debentures, depending on investor demand.
Sebi Chairman G N Bajpai has indicated that the clarifications will be issued soon.
But listing is expected to be made mandatory for fresh bond issues. The circular in its present form is not clear on these points.
Market sources indicated that Sebi could not force companies to list their existing bonds. "Investors can only request corporates to do so," the sources said, adding that corporates would comply with the request only if they wished to.
The sources said the securities watchdog was planning to implement this clause immediately to prevent the market from becoming illiquid.
In its circular, Sebi had said companies issuing debt would have to make full disclosures as required under the listing agreement, and a separate listing agreement.
The regulator is expected to relax the disclosure norms to an extent, especially in auditing so that the timeframe is reduced.
At present, disclosures, which are according to the Disclosure and Investor Protection Guidelines required for equity issues, take up a lot of time, stretching the process of raising capital through this route.