Liquidity Window Facility For Debt Securities

SEBI, vide circular dated October 16, 2024, has introduced a new Liquidity Window Facility ("Facility") under Regulation 15 of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 ("NCS Regulations"). It allows investors to sell listed debt securities back to issuers. Issuers will have the option to offer put options to investors that can be exercised on specific dates or intervals, allowing investors to redeem debt securities before their maturity date. Some of the key features of the Facility are as follows:

1. the Facility can be provided only for prospective issuances of debt securities (held in demat form) through public issue process or on a private placement basis (proposed to be listed);
2. issuers of debt securities may offer the Facility at the time of issuance;
3. the Issuer must provide the Facility only after the expiry of 1 (one) year from the date of the issuance of the debt securities;
4. the issuer must specify the eligibility of investors who can avail the Facility;
5. issuers must set an aggregate limit for the exercise of the put option, which cannot be less than 10% of the total issue size of the debt securities. A sub-limit may also be imposed for each liquidity window session, ensuring that redemptions are managed in an orderly manner;
6. the liquidity window must be kept open for 3 (three) working days; and
7. debt securities will be valued on 'T-1' day where T is the first day of the liquidity window, with payments made to investors within 1 (one) working day of the window closing. The settlement process will be completed within 4 (four) working days.

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