The Securities and Exchange Board of India (SEBI) has made it mandatory for companies to disclose any instance of a default on the payment of interest or repayment of principal to banks or financial institutions within a day of the default.
In a circular issued on Friday, the capital market regulator said that while current regulations require listed companies to disclose delay or default in payment of interest/principal on debt securities, there is no such requirement when loans are taken from banks or financial institutions.
“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/non performing assets. Some companies have also been taken up for initiation of insolvency and bankruptcy proceedings,” stated the SEBI circular, adding that the new norms would come into effect from October 1.
The disclosures shall be made to the stock exchanges when the entity has defaulted in payment of interest/instalment obligations on debt securities (including commercial paper), medium term notes (MTNs), foreign currency convertible bonds (FCCBs), loans from banks and financial institutions, external commercial borrowings (ECBs) etc, added the circular.
Companies have also been directed to provide information pertaining to defaults to the concerned credit rating agencies in a timely manner.