India's markets regulator, Sebi, told Axis Capital on Tuesday not to provide any credit risk protection in debt securities transactions, modifying a previous ruling that prevented the business from functioning as a merchant banker for new debt issues.

The Securities and Exchange Board of India further directed it not to issue any guarantee or indemnification, resulting in the development of a "structured secured credit transaction".

"I am willing to modify the interim direction...to limit the debarment to the activities alleged to be in violation of the rules," Sebi member Ashwani Bhatia stated.

Axis Capital was prohibited from serving as a banker for new debt issuance by the SEC in an interim decision issued in September, citing alleged rule violations.

The regulator then claimed that in March 2021, Sojo Infotel, a holding company that was created by the majority owners of the Indian phone manufacturing company Lava Group, issued bonds worth $31.1 million, to which Axis Capital had guaranteed repayment.

Axis Capital stepped in to pay the outstanding bond dues, which is not allowed, according to Sebi, because the company was unable to reimburse the bondholders at the time of redemption in March 2024.