India’s publicly listed firms must disclose any failure to repay loans within 24 hours in cases where 30 days have passed since the default, its securities regulator said on Wednesday, tightening rules at a time when bond defaults have soared.
The decision was aimed at addressing any gaps in the availability of information to investors surrounding corporate defaults, the Securities and Exchange Board of India (SEBI) said in a statement.
“The philosophy is that more and more information should be in the public domain that guide investors and other stakeholders,” SEBI Chairman Ajay Tyagi told reporters in Mumbai.
The move comes as loan and bond defaults by companies, particularly several housing finance firms, are rising - adding to pressure on India’s banks, which are saddled with a level of bad debt that is one of the world’s highest.
India’s housing finance companies and shadow lenders, a key source of credit to millions, have been battling a credit crunch since giant shadow bank IL&FS collapsed in late 2018 amid fraud allegations.
Publicly-listed Dewan Housing Finance Corp Ltd is one of India’s top defaulters, and owes close to 1 trillion rupees ($14 billion) to its debtors, which include banks and mutual funds.
The SEBI also tightened rules for portfolio managers, requiring that such firms must have a net worth of 50 million rupees ($696,233) from the earlier 20 million rupees.
It also doubled the required minimum investment by clients of portfolio managers to 5 million rupees from 2.5 million rupees.
“We have many clients between the 2.5 to 5 million-rupee bracket that are going to be disappointed,” said Deepak Shenoy, the founder of Capitalmind, a portfolio manager in Bengaluru that manages 1.1 billion rupees in assets.
“It’s not extremely bad ... (but) it will definitely affect business,” Shenoy said.