The Securities and Exchange Board of India (SEBI) has temporarily relaxed the norms related to debt default on account of the ongoing COVID-19 lockdown and the moratorium permitted by the Reserve Bank of India (RBI).
The capital markets regulator has said that if a default takes place solely due to the lockdown or the moratorium, then credit rating agencies (CRAs) need not recognise it as default.
Operational challenges
“... based on its assessment, if the CRA is of the view that the delay in payment of interest/principal has arisen solely due to the lockdown conditions, creating temporary operational challenges in servicing debt, including due to procedural delays in approval of moratorium on loans by the lending institutions, CRAs may not consider the same as a default event and/or recognise default,” stated a SEBI circular issued on Monday.
This would also be applicable on any rescheduling in payment of debt obligation done by the issuer, prior to the due date, with the approval of the investors/ lenders and the relaxation will be extended till the period of the RBI moratorium, it added.
