Skip to main content

Sebi to meet rating agencies on faster access to default data

By
Sebi to meet rating agencies on faster access to default data
Capital market regulator Sebi will meet credit rating agencies this week to explore ways to have quicker access to information on loan defaults by corporates. With the Reserve Bank of India (RBI) having so far refused to share the sensitive information beyond the banking industry, Sebi is keen that all rating agencies take membership of credit information companies (CICs) to obtain default data that banks have to report to CICs.
Many corporates as well as banks are reluctant to share default information with rating agencies. The only agency that receives the data on a daily basis is Central Repository of Information on Large Credit (CRILC), a RBI controlled entity, which only gives banks (but not other lenders and market participants like NBFCs) access to the data.
Compared to this, CICs typically come to know about defaults after a month or a fortnight."The regulator may discuss ways to improve the quality of data, its robustness,whether frequency can improve and how rating agencies can use the information.
When a loan is overdue for a day (described as SMA-0), banks will come to know about it immediately. However, if the company services the overdue loan interest a week later and regularises the loan account, it will not show up as a'default' when information is passed on to CIC and subsequently to rating agencies," said an industry official.
According to stock exchange listing guidelines, publicly traded companies are required to immediately share information on default on debt instruments like debentures and bonds. But, such disclosures are not mandatory for default on loans.
However, before downgrading a corporate to 'default' grade, credit rating agencies may be required to extract some confirmation (on loan default) either from the lender or borrowing company.
Last year, Sebi had asked rating agencies to explain the reasons that lead to sudden downgrade of RCom debt securities and loans by several notches and whether investors of the troubled telco could have been alerted through early rating actions.
After rating agencies spelt out that they come to know of loan defaults only after two to three months - with neither banks nor corporates cooperating - Sebi flagged off the importance of immediate dissemination of default information. The central bank, however, felt that disclosing SMA-0 data could further destabilise the borrower.
In banking parlance, loans are categorised as SMA-0 when interest or principal is overdue for less than a month; SMA-1 when payment is overdue for less than 2 months but more than a month; and SMA-3 when it is overdue for 2-3 months. Rating agencies say they can do a meaningful job only when information is received soon after there is a default.
The Business Standard, New Delhi, 14th February 2018

Comments

Post a Comment

Popular posts from this blog

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

By
  India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said.   Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm
Post a Comment
Read more

Credit card spending growth declines on RBI gaze, stress build-up

By
  Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep
Post a Comment
Read more

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

By
  India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem.   “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and
Post a Comment
Read more