Sebi asks India Inc to inform bourses on loan defaults in one working day

However, there is no stipulation on cos to make disclosures with regards to loans taken from banks

Capital market regulator Securities and Exchange Board of India (Sebi) on Friday made it compulsory for listed companies to make a disclosure to stock exchanges if they default on interest or principal payment obligations to banks.

The move is aimed at maintaining transparency and keeping investors informed.

At present, under the Sebi's Listing Obligations and Disclosure Requirements (LODR), companies have to make specific disclosures if there is a delay or default in the payment of interest or principal on debt securities, such as non-convertible debentures, listed non-convertible redeemable preference shares, foreign currency convertible bonds (FCCBs).

However, there is no stipulation on companies to make disclosures with regards to loans taken from banks and financial institutions. This is despite most of the companies relying on bank loans.

Sebi said companies will now have to make disclosures with pertaining to defaults on debt securities such as commercial paper, medium term notes (MTNs), bank loans and external commercial borrowings (ECBs).

Experts said Sebi's move is welcome as it will help investors better understand the financial health of a company.

Sebi has said the disclosures will have to be made within one working day from the date of the instance of the first default. Sebi has also asked listed entities to separately provide information pertaining to defaults credit rating agencies in a timely manner.

Bank loans worth more than Rs 12 lakh crore have turned NPAs.

"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 or non-performing assets (NPAs). Some companies have also been taken up for initiation of insolvency and bankruptcy proceedings," Sebi said in a circular.