SBI to set up trustee company to manage corporate debt market dev fund

State Bank of India (SBI) will set up a trust company, which will be its wholly owned subsidiary, to manage the Corporate Debt Market Development Fund (CDMDF).

SBI Funds Management Ltd has been identified as the investment manager and sponsor of the fund.

In a regulatory filing on Tuesday, the SBI said it had agreed to set up the trustee company as a wholly owned subsidiary of the bank to manage the fund.

The filing said the proposal is also subject to regulatory approvals.

SBI owns 62.53 per cent stake in SBI Funds Management Ltd.

The creation of the CDMDF was announced by market regulator Sebi earlier this year.

The fund will act as a supportive facilitator for the purchase of investment grade corporate debt to instill confidence among corporate bond market participants in times of distress. It will also help enhance secondary market liquidity by establishing a permanent institutional framework for activation in times of market stress.

In times of market turmoil, there can be redemption pressure on mutual fund open-ended debt plans, especially schemes with relatively low rating sheets, and a lack of sufficient liquidity in the corporate debt market.

During such scenarios, the fund will be instrumental in ensuring stability in the market.