SEBI is proposing to open the CDS market for Mutual Funds, exploring the benefits of corporate bonds for fundraising. Efforts to expand India's corporate bond market using CDS and mutual funds to manage risk and boost investor confidence.
Corporate bonds offer lower interest rates and protect management control.
SEBI's move to allow CDS in mutual funds improves risk management and investor confidence.
Deep dives
Benefits of Corporate Bonds Over Other Financing Options
Companies have various methods to raise funds such as bank loans or issuing shares, each presenting its own challenges like high interest costs or dilution of management control. To address these issues, companies can opt for corporate bonds, allowing them to borrow from the public with fixed interest payments and minimal impact on management control. This alternative offers lower interest rates than bank loans and avoids diluting management control over decision-making, making it a favorable choice for companies.
SEBI's Initiative to Expand Credit Default Swap Market for Mutual Funds
SEBI aims to develop the corporate bond market by introducing new regulations to enhance investor trust. Recently, SEBI's proposal to extend the Credit Default Swap (CDS) market to mutual funds enables them to manage risks effectively. CDS acts as insurance against bond default, safeguarding investments in case of issuer insolvency. Mutual funds utilizing CDS can provide more predictable returns to investors, fostering confidence in the bond market while diversifying their risk management strategies.
1.
Exploring SEBI's Proposal to Open CDS Market for Mutual Funds and the Benefits of Corporate Bonds for Companies