SEBI seeks bond default disclosure, spares bank loans

After number of defaults and delayed repayments by companies like IL&FS, Jet Airways and the liquidity crisis in the non-banking financial companies (NBFCs) sector, SEBI (The Securities and Exchange Board of India) has stepped in to tighten the disclosure norms for corporate bonds by directing debenture trustees (DTs) to show the full details, including interest and status of payment so as to bring more transparency.

In the circular issued on Monday, SEBI said that DTs should display full details of interest due to the debenture holders in respect of all issues during a financial year within five days of start of the financial year, on their website. Also, the status of payment should be updated, and if payment is not on time, then DTs should update the calendar specifying the date of such payment, with a remark ‘delayed Payment.’ DTs also need to disclose compensation agreements with their clients.

Issuers should henceforth forward the details of debenture holders to the DT at time of allotment and thereafter by the 7th working day of every next month to enable DTs to keep their records updated and to communicate effectively with the debenture holders. In case of delay in listing of debt securities beyond 20 days from the deemed date of allotment, the company should pay penal interest of at least 1% per annum over the coupon rate from the expiry of 30 days after the supposed date of allotment till listing of such debt securities to the investor.

Some of the top defaulters are listed on the stock exchanges. The RBI refused to make public the list of loan defaulters with public banks instead of a Supreme Court order to make this information public. “Corporate in India are even primarily reliant on loans from the banking sector. Some firms have been taken up for initiation of solvency and bankruptcy proceedings,” SEBI had said.