Business

Don’t consider lockdown-related loan repayment delays as default: SEBI to credit rating agencies

The move follows a three-month moratorium on payment permitted by the Reserve Bank of India.

Markets regulator SEBI on Monday asked credit rating agencies not to consider as default any delay in payment of interest or principal loan amount arisen solely due to the nationwide lockdown conditions.

The move follows a three-month moratorium on payment permitted by the Reserve Bank of India to mitigate the burden of debt servicing due to disruptions caused by the coronavirus pandemic and to ensure continuity of viable businesses.

In a circular, the Securities and Exchange Board of India (SEBI said a differentiation in treatment of default, on a case to case basis, needs to be made as to whether such default occurred solely due to the lockdown or loan moratorium.

“Based on its assessment, if the credit rating agency (CRA) is of the view that the delay in payment of interest or 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, CRA may not consider the same as a default event,” SEBI said.

This will also be applicable on any rescheduling in payment of debt obligation done by the issuer, prior to the due date, with the approval of investors or lenders, it added.

The relaxation has been extended till the period of moratorium given by the RBI.

In addition, the regulator has also given relaxations to rating agencies from certain disclosures requirements.

Considering that the CRAs are dependent on issuers and third parties for information collection which may be impaired due to current lockdown, SEBI has given relaxation from timelines for rating action or issue of press release by rating agencies.

However, CRAs should endeavour to finish the exercise on a best effort basis. Such cases will be put up for ratification by the rating sub-committee of the board of CRAs.

Further, an extension of 30 days has been granted for making annual and semi-annual disclosures by CRAs on their websites for the periods ending March 31, 2020.

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Printable version | May 28, 2020 6:44:17 PM | https://www.thehindu.com/business/dont-consider-lockdown-related-loan-repayment-delays-as-default-sebi-to-credit-rating-agencies/article31206073.ece

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