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SEBI to listed firms: Disclose default details within 24 hrs from 30th day

Sebi Chairman Ajay Tyagi said that this move will ensure “better disclosure and transparency.” The decision has been taken to address the gaps in the availability of information with respect to defaults, Sebi said.

By: ENS Economic Bureau | Mumbai | Published: November 21, 2019 3:34:57 am
Sebi to listed firms: Disclose default details within 24 hrs from 30th day Sebi Chairman Ajay Tyagi at the market regulator’s headquarters in Mumbai on Wednesday. (Express photo by Pradip Das)

The Securities and Exchange Board of India (Sebi) on Wednesday tightened the norms for listed companies on disclosure of loan defaults.

As per the new norms, in case of default in repayment of principle or interest on loans beyond 30 days, listed companies will have to disclose the “fact of such a default” within 24 hours.

“The board has decided that in case of any default in repayment of principle and interest on loans from banks or financial institutions which continues beyond 30 days from the pre-agreed payment date, listed entities shall promptly, but not later than 24 hours from the 30th day, disclose the fact of such default,” said Sebi in a statement.

The new norm will be applicable to listed firms from January 1, 2020.

Explained

Investors to benefit

With the new default disclosure norms for publicly traded firms, the potential risks to a firm will be known to investors and lenders of the company. Investors can, as a result, take informed investment decisions based on these disclosures.

Sebi Chairman Ajay Tyagi said that this move will ensure “better disclosure and transparency.” The decision has been taken to address the gaps in the availability of information with respect to defaults, Sebi said.

“The objective of new default disclosure is to get more openness to help investors,” said Tyagi. He also said that the new default disclosure norms have been set in consultation with the Reserve Bank of India (RBI). “One day default disclosure was not agreed to by the board. This scheme of 30 days is implementable,” Tyagi said, referring to an earlier proposal of making a loan default disclosure within a day of default.

In the past one year, several firms have defaulted on loans and the late disclosures of such defaults have led to erosion of wealth for investors.

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