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Loan defaults: Sebi to push for urgent disclosure by listed firms

Monday, March 05, 2018

Seeking to join forces with other agencies to check financial frauds, regulator Sebi plans to make it mandatory for listed companies to make urgent disclosure about all major loan defaults.

Concerned over an alleged loan fraud of over Rs 12,000 crore at state-run Punjab National Bank remaining undetected for years, the capital markets watchdog is revisiting its "on-hold" proposal to mandate listed firms to disclose all 'substantial' loan defaults within a day.

The proposal is expected to be discussed by Sebi's board at a meeting later this month, even as a final decision is yet to be reached on the threshold limit for quantifying a loan default as 'substantial', a senior official said.

One view is to keep this 'threshold' as low as Rs 5 crore, though some want it higher at Rs 50 crore, the official said, while adding there would be other factors such as direct and indirect systemic impact of the default to determine whether it would be considered 'substantial' or not. Besides, the Sebi board is also likely to discuss the Kotak panel report on corporate governance. The high-level panel, headed by eminent banker Uday Kotak, has suggested a major overhaul of corporate governance norms for listed companies, including steps to improve oversight of financial irregularities at listed firms.

The Securities and Exchange Board (Sebi) has already received public comments on the report, while preliminary discussions have been held with the corporate affairs and finance ministries in this regard.

With regard to the loan default disclosure, Sebi's board will discuss its "on-hold" proposal to mandate listed companies to disclose to the stock exchanges about their loan defaults, to banks and financial institutions, within one working day of such a miss.

Once implemented, the move would help investors take an informed decision at the earliest in cases of loan defaults by listed companies and at the banks.

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