Use of blockchain for security and covenant monitoring becomes operational

To begin with, movable assets such as furniture, equipment, inventory and current assets such as portfolio of advances and receivables will be tracked at portfolio level, Sebi says

The use of distributed ledger technology (DLT) or blockchain has become operational for security and covenant monitoring in the area of debenture issuance. Market regulator Sebi on Monday issued operational guidelines in this regard. “With effect from April 01, 2022, the recording of asset details (and their verification), allotment, listing and payment of interestor redemption shall  be  available  in  the DLT system,” Sebi said in a press release.

The move is expected to enhance transparency and efficiency when creation and monitoring of covenants of non-convertible securities.

To begin with, movable assets such as furniture, equipment, inventory and current assets such as portfolio of advances and receivables will be tracked at the portfolio level, Sebi has said.

A 12-digit alphanumeric string will be assigned as  unique asset ID under the new system.

Sebi has provided a relaxation till July 1 to issuers that are unable to record details in the system after providing explanation to the depositories. For existing outstanding non-convertible securities, issuers will have to enter the details into the DLT system on or before September 30, 2022.