India investigates debt trustees of SBI, Axis and IDBI over alleged fee cartel

India’s antitrust regulator is investigating the trustee entities of State Bank of India, Axis Bank and IDBI Bank over alleged collusion over fees, prompting a lawsuit from a group that represents them, Reuters documents showed.

Indian regulations require companies that take on debt to appoint a so-called “debt custodian” to protect investors’ interests. The trustees collect a fee from the companies issuing the debt and conduct independent due diligence reviews.

The three companies studied – SBICAP Trustee Company, Axis Trustee and IDBI Trusteeship – are among the leading companies in India and manage hundreds of billions of dollars by providing trustee services not only for debt securities but also real estate and other investment funds.

The Competition Commission of India (CCI) said in a confidential December decision that the Trustees Association of India – a body of which the trio are founding members – increased the fee for helping companies raise debt “significantly” last year and have prevented members from going below a floor price, thereby affecting competition.

The association has filed a lawsuit in Mumbai aimed at overturning the antitrust investigation guideline, which it has described as “illegal” and “capricious”, according to court documents. The lawsuit will be heard on Thursday.

The antitrust investigation and upcoming court hearing, details of which have not yet been announced, could impact India’s nearly $500 billion corporate bond market by changing costs and affecting the way trustees operate.

A finding of cartel activity can result in a fine of up to three times the profits for each year the fee was assessed by the trustees, or 10% of the annual turnover for the period of the infringement, whichever is greater.

SBICAP Trustee and IDBI Trusteeship have not responded to requests for comment. Axis Trustee, who is listed in documents as President of the Trustee Association, also did not respond.

The CCI, which does not publicly disclose its ongoing antitrust investigations, did not respond to an email seeking comment.


The antitrust proceedings were triggered by a complaint by the Indian gold financier Muthoot Finance. When it looked to borrow in August last year, Muthoot received a quote that was 300% higher than previous rates.

The documents showed that when Muthoot protested, IDBI said in an August email “the new pricing structure will be determined by the Trustees Association,” adding that “any discrepancy on our part in quoting the price will have an adverse impact on us.” would lead”.

The CCI, in ordering its investigation, found that “Such collective decision-making by the association…impairs competition in the markets.”

In February, she asked the Trustees Association to provide minutes of their meetings and explain their role in setting a minimum fee structure, a document showed.

The Association of Trustees has defended in court filings that the higher fee is justified given that its cost burden has increased over the years due to heightened regulatory compliance requirements.

It said it informed market regulator SEBI last year that the pricing structure would be set by trustees but “would not be below the benchmark floor price”.

The group said that by law the matter could only be investigated by a “specialized sectoral regulator”, in this case SEBI.

SEBI “already provides enough controls to deal with price fixing (cartelization),” she argued.

Prior to contacting the antitrust authority, Muthoot also filed a complaint against the trustees at SEBI, which is still under investigation, the filing says.

SEBI and Muthoot did not respond to Reuters inquiries.

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