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Sebi asks listed firms to inform exchanges on loan default in one working day

LiveMint logoLiveMint 04-08-2017 PTI

New Delhi: Tightening its disclosure norms for listed companies defaulting on loan payment from banks and other financial intuitions, regulator Sebi on Friday asked firms to make such information public within one working day. This would come into force from 1 October, the Securities and Exchange Board of India (Sebi) said in a circular.

“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 (NPAs). Some companies have also been taken up for initiation of insolvency and bankruptcy proceedings,” Sebi noted.

In order to address this critical gap in the availability of information to investors, Sebi has asked listed entities to inform exchanges in case it has defaulted in payment of interest, instalment obligations on debt securities, loans from banks and financial institutions and external commercial borrowings (ECBs).

The companies would have to inform stock exchanges about date of default as well as date of making such disclosure, name of the lender, number of investors in the security as on date of default, details of the obligation, current default amount and gross principal amount on which the default has occurred.

“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 said. Listed entities entity would also separately provide information pertaining to defaults to the concerned credit rating agencies in a timely manner and as may be specified by Sebi from time to time.

Last month, the regulator had asked listed banks to make disclosures if provisioning and NPAs assessed by RBI exceeded 15% of published financials. Sebi had said that 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 is aimed at helping banks to recognise their stressed assets as non-performing more uniformly.

The regulator asked companies to make disclosure about debt securities and loans from banks and financial institutions if there is any outstanding amount under default as on the last date of any quarter within seven days from the end of such period.

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