Companies that have issued bonds are queuing up before the National Stock Exchange with applications to list their debt.

The rush comes after the Securities and Exchange Board of India's and the Reserve Bank of India's diktat that NSE brokers cannot trade in unlisted bonds and that every listed company has to list its debentures and bonds, even for private placement.

The RBI also issued draft guidelines capping banks' investment in unlisted bonds at 20 per cent of their total portfolio. Put together, these have rendered illiquid almost 80 per cent of corporate debt outstanding in the market.

The NSE is said to have received at least 7-10 applications from companies to list their unlisted bonds on Thursday. Leading the pack were Reliance Industries and Hudco, merchant banking sources said.

Larsen and Toubro, which has a large bond portfolio, might approach the listing authority soon, a merchant banker said.

The NSE will find it difficult to accept all the applications since listing requires companies to make full disclosure.

A merchant banker liaising with the NSE for listing corporate bonds added, "The NSE has already sought several clarifications from the markets regulator and all listing decisions are subject to Sebi's response."

Under the existing norms, unlisted bonds issued by companies are traded in the NSE's permitted category. Bankers said although many companies wanted to list, there was lack of clarity on whether the new rules applied to all existing paper and whether companies were required to make full disclosure for such old issues.

Brokers registered with the Bombay Stock Exchange on the other hand are unaffected as there is nothing called a permitted category on the exchange.

BSE brokers can only deal with and issue contract agreements in listed bonds and debentures.

The total turnover in corporate bonds trading has dipped. The few deals being contracted now are one on one, among mutual funds and primary dealers.

In fact, bankers said, mutual funds would be worst hit as they were the ones who maintained large corporate bond portfolios for meeting redemption pressures.

Firms seek short-term finance

Large corporates have started making enquiries with banks for short-term bridge finance, as a direct fallout of the Sebi-RBI diktat.

Banks confirm that they are receiving a large number of enquiries for short- term finance. Most of these companies are public sector undertakings which used to frequent the bond market without listing and rating their bond issues.