NEW DELHI: In order to ensure transparency in the market and early notification of loan defaults, regulator Securities and Exchange Board of India (SEBI) is planning to come up with a framework to ensure timely and detailed disclosure of loan defaults by listed firms.“SEBI aims at examining stipulation of timely and detailed disclosures pertaining to defaults on debt obligations by listed entities to enhance transparency,” the regulator said in its annual report for 2017-18.
What is remarkable is that the proposal may mandate listed companies to disclose to the stock exchanges about their loan defaults within one working day of missing a repayment. Once implemented, the move would help investors to take an informed decision at the earliest in case of loan defaults by listed companies.In the last few months, several companies and rating agencies have come under the regulatory scanner for failing to make timely disclosure about loan default risks. The most recent one was the `14,000 crore loan fraud at state-run Punjab National Bank, which remained undetected for years. There was a delay in sharing the news with SEBI.
In light of such cases of loan defaults by listed entities, SEBI chief Ajay Tyagi had in March said that the decision on the proposed norms necessitating listed companies to make urgent disclosures about all major loan defaults lies with the regulator’s board.The new rules were to come into effect initially from October 1 last year, but were deferred after the banks asked for more time as the domestic credit market was different from its western counterparts where such disclosures are mandatory.In the last couple of days, SEBI has introduced sweeping reforms to increase transparency.
Reforms suggested
In the last couple of days, SEBI has introduced sweeping reforms to increase transparency. On Monday, a high-level SEBI committee recommended that wilful defaulters and fugitive economic offenders cannot settle a case under settlement norms, as well as the addition of a confidentiality clause in the process.