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Published on 30/03/2020 5:44:46 PM | Source: Live Mint

Sebi asks rating firms not to term as defaults repayment delays amid lockdown

Posted in Economy News| #Economy #SEBI

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MUMBAI: The Securities and Exchange Board of India (Sebi) on Monday asked credit rating agencies not to classify a company as a defaulter if it misses payments of interest or principal owing to the nationwide 21-day lockdown.

To ease troubles for companies who need to continue servicing their debt even if businesses are disrupted due to the lockdwon, the Reserve Bank of India (RBI) made provisions of deferment of repayments and extended moratorium on loan installments for three months.

However, these relaxations on payment will be granted to companies on a case-to-case basis.

"If the CRA (rating agency) is of the view that the delay in payment of interest/principle 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 recognize default. Appropriate disclosures in this regard shall be made in the press release," said Sebi in a circular on Monday.


This relaxation on rating action will be applicable to any payment reschedule, provided this has been agreed upon by the lenders.

Rating agencies have also been granted a relaxation on timelines for issuing press releases on ratings action as they have to rely on information provided by third parties, Sebi said.

"The ability to collect information to assign ratings is impaired due to the lockdown so extension on applicable timelines is granted," said Sebi.