RBI, Sebi split over default recognition; MFs, rating agencies seek clarity

In the absence of clarity, NBFCs are staring at huge repayment obligations at a time when their liquidity cover is declining

Contradictory moves by the Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) over default recognition, particularly in non-banking financial companies (NBFCs), have put mutual funds (MFs) and credit-rating agencies in a spot at a time when Rs 2.5 trillion worth of papers are due for maturity.

The RBI has announced a three-month moratorium on term loans given by banks, but is silent on liabilities of shadow banks. Sebi, on the other hand, has issued guidelines to rating firms, asking them to avoid assigning a default tag to companies that are unable to pay owing