SBI to set up new trustee company for managing the CDMDF

To manage the Corporate Debt Market Development Fund (CDMDF), the State Bank of India (SBI) will establish a trustee firm, which will be a fully-owned subsidiary. The fund's investment manager and sponsor have both been recognized as SBI Funds Management Ltd.

In a regulatory statement on Tuesday, SBI stated that it had authorized the creation of the trustee firm as the bank's wholly-owned subsidiary to manage the fund.

According to the filing, the idea is also subject to regulatory approvals. In SBI Funds Management Ltd., SBI holds 62.53 percent ownership. The market regulator SEBI announced the creation of the CDMDF earlier this year. In times of crisis, the fund will serve as a backup facility for the acquisition of investment-grade corporate debt securities, fostering confidence among participants in the corporate bond market. Additionally, it will increase secondary market liquidity by establishing a stable institutional framework for market stress activation.

In times of market disruption, open ended debt mutual fund schemes may face redemption pressure, particularly those that hold relatively lower rated papers, and the corporate debt market may not have enough liquidity. The fund would be useful in these situations to maintain market stability.

Source: Media Reports