The Securities and Exchange Board of India (SEBI) asked the listed Companies to disclose their defaults on payment of interest/ repayment of principal amount on loans from banks / financial institutions, debt securities, etc, within one working day.
The Circular issued by SEBI asked to disclose loan defaults runs contrary to the position of banking regulator, Reserve Bank of India, which has been refusing to name the defaulters.
The circular is applicable from 1st October 2017.
“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,” it said.
The circular address this critical gap in the availability of information to investors, listed entities.
Currently, investors and public are in the dark about defaults by companies and they realise it only when the valuations go down. Some of the top defaulters are now listed on the stock exchanges. The RBI has refused to make public the list of loan defaulters with public banks despite a Supreme Court order to make this information public.
The disclosures should be made to the bourses when the entity has defaulted in payment of interest/installment obligations on debt securities (including commercial paper), Medium Term Notes (MTNs), foreign currency convertible bonds (FCCBs), loans from banks and financial institutions, external commercial borrowings (ECBs), SEBI said.
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,” it said.
Read the full text of the Circular below.
