Sebi sets framework for banks on bad loan disclosures

Putting in place a stricter framework, Sebi on Thursday directed all listed banks to disclose any divergence in bad loan provisioning within 24 hours of receiving RBI's risk assessment report, rather than waiting to publish the details in their annual financial statements.

In recent months, there have been several instances of under-reporting of bad loans by lenders, prompting regulatory action by the RBI.

Sebi's latest decision has been take in consultation with the Reserve Bank of India (RBI).

In a circular, Sebi noted that disclosures in respect of divergence and provisioning are in the nature of material events and hence necessitate immediate disclosure. Further, this information is also price sensitive, requiring prompt disclosure by a listed entity.

Accordingly, the regulator has decided that "listed banks shall make disclosures of divergences and provisioning beyond specified threshold, as mentioned in aforesaid RBI notifications, as soon as reasonably possible and not later than 24 hours upon receipt of the Reserve Bank's Final Risk Assessment Report (RAR), rather than waiting to publish them as part of annual financial statements".

This new framework will come into force with immediate effect, it added.

The disclosures need to be made in case the banks' additional provisioning for non-performing assets (NPAs) assessed by the RBI exceeds 10 per cent of the reported profit before provisions and contingencies, and if the additional gross NPAs identified by the RBI exceed 15 per cent of the published incremental gross NPAs.

Besides, Sebi has issued a format in which such disclosures need to be made.