Indian defaults spark rules that drag bond sales to 13-year low

- Starting this month, bond trustees need to evaluate and ensure that assets backing bonds are at all times adequate to discharge the interest and principal amount.
Rising defaults have prompted India to tighten oversight of corporate bond sales, causing issuance to slump in a blow to a long-sought goal of expanding the market.
Offerings of rupee notes have fallen to 34.4 billion rupees ($463 million) this month, the slowest start to a financial year since 2008. That’s due in part to rules that took effect April 1 strengthening the role of trustees for secured bonds backed by assets. Such offerings have made up about 60% of India’s total domestic issuance in the last 10 years.
Firms defaulted on at least 52 billion rupees of domestic bonds so far this year, the most on record for a similar period. That comes as a setback as Covid-19 cases surge recently. It also reverses the trend from last year when unprecedented stimulus helped the pace of non-repayment slow from an all-time high in 2019.
What The New Rules Do
What’s Next