Sebi eyes framework for timely disclosure of loan defaults by listed firms

Tightening of the disclosure norms is aimed at helping banks recognise their stressed assets as non-performing more uniformly and enhance transparency in the securities market

Markets regulator Sebi is looking to stipulate a framework for timely and detailed disclosures of loan defaults by listed entities to enhance transparency.

Several companies and rating agencies have come under the regulatory scanner for failing to make timely disclosure about the loan default risks.

Tightening of the disclosure norms is aimed at helping banks to recognise their stressed assets as non-performing more uniformly and enhance transparency in the securities market.

"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.

In March, Sebi chief Ajay Tyagi had said 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 banks asked for more time as the domestic credit market was different from its western counterparts where such disclosures are mandatory.

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 take an informed decision at the earliest in cases of loan defaults by listed companies.

The proposal gains attention amid the loan fraud of Rs 14,000 crore at state-run Punjab National Bank remaining undetected for years.

The transactions were carried out by diamantaires Nirav Modi and Mehul Choksi by allegedly acquiring fraudulent letters of undertaking (LoU) from PNB's Brady House branch in Mumbai to secure overseas credit from other Indian lenders.