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Corporate Debt Market Development Fund

Corporate Debt Market Development Fund:

The Securities and Exchange Board of India (SEBI) has introduced the ‘Corporate Debt Market Development Fund’ to prevent financial crisis.

  • The ‘Corporate Debt Market Development Fund (CDMDF) is a backstop facility for specified debt funds during market dislocations.
  • The fund is intended to provide liquidity support in the event of a financial crisis.
  • It aims to instil confidence amongst the participants in the corporate bond market and to generally enhance secondary market liquidity.
  • The proposed CDMDF will have an initial corpus of Rs 3,000 crore contributed by mutual funds.
  • The government has approved a 10-time leverage of the fund (Additional corpus), thus CDMDF may raise funds up to Rs 30,000 crore.
  • Contributions to the fund can be done by the specified debt-oriented mutual fund schemes and asset management companies of mutual funds.
  • This fund is guaranteed by the National Credit Guarantee Trust Company (NCGTC) and the backstop facility will be managed by SBI Mutual Fund.
  • Specified mutual fund schemes will have access to the fund for selling securities during market dislocation.
  • This access is proportional to the contribution made to the fund at a mutual fund level.