SEBI board approves tighter norms for full disclosure on loan defaults with rating agencies

Mumbai: Amid concerns over banks citing ‘client confidentiality’ to resist sharing of information on delayed loan repayments and possible defaults by their borrowers, capital market regulator SEBI on Wednesday announced new norms to make it mandatory for companies to provide these details to credit rating agencies. Amid numerous cases of huge loan defaults by corporates, including in cases like Infrastructure Leasing & Financial Services Ltd, credit rating agencies have also come under the scanner for failing to flag potential credit risks of the securities and entities rated by them. To fill this regulatory gap, SEBI has decided to amend its regulations for credit rating agencies to ensure that any listed or unlisted entity, before getting rated, gives an explicit consent to obtain from their lenders and other entities full details about their existing and future borrowings as also their repayment and delay or default of any nature and provide the same to the rating agencies. The proposal, which the regulator said would enable rating agencies to get timely information on possible defaults, was approved by SEBI’s board at its meeting here.