This is what Vijay Mallya has taught Sebi

To ensure there’s no rerun of Mallya episodes in Indian banks, The Securities and Exchange Board of India (Sebi) has mandated all listed companies to inform stock exchanges if they falter on loans.

As per the new clause, the company would require to inform the stock exchanges within one working day of the default, according to an ET news report.

Currently, listed companies require to disclose material events and information to stock exchanges. Companies make specific disclosures in instances such as delays and defaults in the payment of interest and principal on debt securities, listed non-convertible debentures, redeemable preference shares and foreign currency convertible bonds.

To resolve the bad loan burden of the banks, the government and the central bank have started getting lenders to kick off insolvency proceedings against big defaulters.

If a borrower is unable to pay on the due dates, according to the new Insolvency and Bankruptcy Code (IBC), the lending bank can initiate the insolvency resolution process on the next day. But the RBI mandates, banks can declare a borrower defaulter only after 90 days.

This move by Sebi is significant because may a times, a defaulter makes payment just a few days before 90-day deadline to retain standard asset classification on their loans. Also the new clause would mean the borrower would have limited ability to raise further capital.