In a significant step to bolster India’s corporate debt market, the Securities and Exchange Board of India (SEBI) issued a circular on December 13, 2024, classifying the Corporate Debt Market Development Fund (CDMDF) as a Category I Alternative Investment Fund (AIF).

The CDMDF, established under Chapter III-C of SEBI’s AIF Regulations, 2012, functions as a backstop facility to purchase investment-grade corporate debt securities during periods of market stress.

This initiative aims to instil confidence among market participants and enhance secondary market liquidity.

SEBI clarified this classification under Regulation 3(4)(a) of the AIF Regulations, following representations seeking clarity on the fund’s regulatory categorisation. This move aligns with the CDMDF’s broader objective of strengthening the corporate bond market and providing a reliable institutional framework to address liquidity concerns in times of financial distress.

The circular reinforces SEBI’s commitment to safeguarding investor interests and promoting the development of robust and transparent financial markets. Stakeholders, including Asset Management Companies and mutual fund trustees, are expected to align operations with these guidelines. This development is expected to create a more resilient corporate debt market, ensuring stability and liquidity during periods of economic uncertainty.

Read the SEBI communique here.