New Delhi: The Competition Commission of India (CCI) has started investigation of the trustee units of State Bank of India (SBI), Axis Bank, and IDBI Bank for suspected collusion on fees.
According to a report by Reuters, a lawsuit has been filed. The lawsuit will be heard on Thursday.
SBICAP Trustee Company, Axis Trustee, and IDBI Trusteeship are the three companies under the lens.
The regulations mandate that companies raising debt appoint a so-called ‘debenture trustee’ to protect investors’ interests. The trustees also charge a fee from the companies issuing the debt and make independent due-diligence checks on them, according to the report.
These three firms are among the leaders in the business overseeing hundreds of billions of dollars by rendering trustee services for not just debt securities, but also real estate and other investment funds.
In a confidential December order, the CCI said the Trustees Association of India, a body where the trio are founding members, last year “substantially” increased the fee for assisting companies raising debt and prevented members from going below a floor price, thereby hurting competition.
The association has launched a court challenge in Mumbai that seeks to quash the antitrust investigation directive it has termed "illegal" and "capricious", according to court filings.
The anti-trust probe and the impending court hearing, details of which have not been previously reported, could have ramifications on India's nearly $500 billion corporate debt market by altering costs and affecting the way trustees operate.
A finding of cartelisation could lead to a fine of up to three times the profit in each year the fee was fixed by the trustees, or 10 per cent of annual revenue for the period of violation, whichever is more.
SBICAP Trustee, Axis Trustee, and IDBI Trusteeship didn't respond to requests for comment of Reuters.
The CCI, which does not publicly disclose its cartel probes that are underway, did not respond to an email seeking comment.