The Securities and Exchange Board of India (Sebi) is looking to expand the definition of Qualified Institutional Buyer (QIB) to include investors like multi-state cooperatives, small finance banks, higher educational institutions, urban local bodies and Micro Units Development & Refinance Agency (MUDRA).
QIBs in general, are large, sophisticated and informed investors who are considered suitable for making investments in the capital markets and have expertise in evaluating investment opportunities and in managing risks. At present, only larger institutions like mutual funds, venture capital funds, alternative investment funds, select foreign portfolio investors and public finance institutions qualify as QIBs.
According to a consultation paper issued by Sebi, the newly included institutions may need to self-certify that they have the expertise to evaluate the investments and may need to hire outside experts to help with the evaluation.
The regulator said the inclusion of new investors will lead to a high investor base for bond issuers and help create a level playing field within the bond market.
"Such a measure could also lead to a potential increase in the supply of funds to the issuers of debt securities (including for issuers of non-equity regulatory capital), aid better price discovery, which in turn could lower the cost of fundraising and promote capital formation," Sebi said.
"Expanding the definition of QIBs for investing into debt securities will serve to broaden the types, class and categories of investors, enhance access to investment opportunities within the primary issuance at EBP and help in leveling the playing field within the bond market," it added.