Market regulator SEBI has introduced a Liquidity Window facility to improve participation in the corporate bond market. SEBI noted that issuers can give investors put options that are exercisable on pre-specified dates or intervals. Put option allows investors to redeem debt securities before their maturity date. It stated that one of the factors that drive investor participation in a market is the availability of liquidity. Low levels of secondary market transactions in corporate bonds (including due to a large number of institutional investors holding such bonds to maturity) has resulted in the corporate bond market being perceived as illiquid.
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