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Informist, Wednesday, Jun. 18, 2025

MUMBAI – In order to regulate trusteeship activities being carried out by debenture trustees, the Securities and Exchange Board of India has allowed them to engage in activities outside the direct purview of SEBI, subject to certain conditions, the regulatory body said in a press release Wednesday. According to SEBI, debenture trustees may now undertake debenture trustee activities regulated by other financial sector regulators as long as they comply with the regulatory frameworks set by those regulators.

Furthermore, debenture trustees will also be allowed to perform fee-based, non-fund-based financial services activities which are not governed by SEBI or any other financial sector regulators, subject to safeguards that SEBI will specify in due course, the release said. 

Given the possible risks associated with unregulated activities being carried out by a SEBI-registered entity, the board in its meeting held in December 2024 had approved that the non-regulated activities be hived off to a separate legal entity. However, post internal review and feedback obtained from the market participants, the board has now relaxed the requirement of hiving off and has approved the amendments to the debenture trustee regulations.

Additionally, SEBI has approved the insertion of provisions in debentures trustee regulations and the corresponding obligations of issuers. "Currently, there are no distinct provisions specifying the rights of the debentures trustee which could aid them in performing their obligations, roles and responsibilities," SEBI said in the release. "Further, there is absence of corresponding responsibilities on the issuer to facilitate the debentures trustee in carrying out its fiduciary duties."

SEBI will now allow model formats for debenture trust deeds to be prescribed under both the debenture trustee regulations and the issue and listing of non-convertible securities regulations. "Currently, the non-convertible securities regulations and the debentures trustee regulations specify the broader principles of debentures trustee deeds, but there is a lack of uniformity in the debentures trustee deeds being executed, in the absence of any standardised formats," SEBI said.

Further, SEBI has also approved changes to the utilisation of the recovery expense fund. These decisions come after public consultations conducted in November 2024, followed by detailed deliberations within SEBI's corporate bonds and securitisation advisory committee and consultations with industry stakeholders, including two major debenture trustee associations. "It is envisaged that the above proposals will promote ease of doing business for the debenture trustee while addressing the concerns and possible risks associated with unregulated activities being carried out by a SEBI registered entity," the regulator said.  End

Reported by Vaishali Tyagi

Edited by Deepshikha Bhardwaj

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