Loan default: Listed companies get breather from Sebi

The Securities and Exchange Board of India (Sebi) has put off implementation of its directive “until further notice” that required listed firms to inform exchanges if they default on loan payments to banks and financial institutions, a circular of the markets regulator has said.
 
Last month, the regulator had directed listed companies to disclose from October 1 any payment defaults to banks and financial institutions within one working day of such a miss.
 
The move came against the backdrop of the government and the Reserve Bank of India (RBI) stepping up efforts to tackle the menace of bad loans amounting to over Rs 8 lakh crore.

 

“Corporates in India are even today primarily reliant on loans from the banking sector. Many banks are presently under considerable stress on account of large loans to the corporate sector turning into stressed assets, non-performing assets (NPA). Some companies have also been taken up for initiation of insolvency and bankruptcy proceedings,” Sebi had said.
 
To address this critical gap in the availability of information to investors, Sebi had asked listed entities to inform exchanges in case it defaulted on payment of interest, instalment obligations on debt securities and loans from banks and financial institutions and external commercial borrowings.

 
“The entities shall make disclosures within one working day from the date of default at the first instance of default in a specified format,” Sebi had said.
 
Currently, Sebi’s listing guidelines require specific disclosures on delay or default in payment of interest or principal on debt securities, including listed non-convertible debentures, listed non-convertible redeemable preference shares and foreign currency convertible bonds.
 
Similar disclosures are not stipulated with regard to loans from banks and financial institutions.
 
In July, the regulator had asked listed banks to make disclosures if provisioning and NPAs assessed by the RBI exceeded 15 per cent of published financials.

 
Sebi had said such disclosures should be made along with the annual financial results filed immediately following communication of such divergence by the RBI to the bank. The move was aimed at helping banks recognise their stressed assets as non-performing more uniformly.