Sebi asks banks to report divergence in bad loans

Directive follows an RBI circular that asked banks to disclose divergence in asset classification

The Securities and Exchange Board of India (Sebi) on Tuesday asked listed banks to make disclosures if the provisioning and non-performing assets (NPAs) assessed by the RBI had exceeded 15 per cent of their published financials.

“The banks shall disclose to the stock exchanges divergences in the asset classification and provisioning wherever: the additional provisioning requirements assessed by the RBI exceed 15 per cent of the published net profits after tax for the reference period; and/or the additional gross NPAs identified by the RBI exceed 15 per cent of the published incremental gross NPAs for the reference period,” Sebi said in a circular.

The Sebi’s directive follows an RBI circular on April 18 that asked banks to disclose divergence in the asset classification and provisioning. Divergence in the provisioning came in light after the RBI observed the numbers declared by the banks were not tallying with its own estimates. “There have been instances of material divergences in banks’ asset classification and provisioning from RBI norms, thereby leading to the published financial statements not depicting a true and fair view of the financial position of the bank. In order to ensure greater transparency and promote better discipline with respect to compliance with income recognition, asset classification and provisioning norms, it has been decided banks shall make suitable disclosures,” the RBI had said. in its circular.

According Sebi’s Listing Obligations and Disclosure Requirements (LODR) regulations, any material development that would have a significant impact on the company or its financials has to be disclosed in the public domain.

A few months back, Sebi had questioned three private lenders – Yes Bank, Axis Bank and ICICI Bank – about the RBI report on divergence and if they had adhered to all the disclosure requirements.