COVID-19: Sebi Relaxes Norms For Default Recognition By CRAs

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COVID-19: Sebi Relaxes Norms For Default Recognition By CRAs
Yagnesh Kansara - 30 March 2020

Mumbai, 30th March 2020: After the Reserve Bank of India (RBI) doled out concessions to the individuals and SMEs, it is the turn of capital market regulator Securities and Exchange Board of India (Sebi) now. Sebi on Monday relaxed guidelines applicable to Credit Rating Agencies (CRAs) for default recognition amid loan moratorium granted by the RBI due to the coronavirus pandemic.

Sebi has also relaxed compliance norms for AIFs, VCFs, Portfolio Managers, FPIs due to COVID-19 pandemic. The markets regulator said it felt a need for temporary relaxations in compliance by CRAs in view of the developments arising due to COVID-19 pandemic and in light of the moratorium permitted by RBI on loan servicing, working capital facilities for three months.

Based on its assessment, if the CRA is of the view that delay in payment of interest/principle has arisen solely due to the lockdown, creating temporary operational challenges in servicing debt, including procedural delays in approval of moratorium on loans by the lending institutions, then it may not consider it as default.

Such relaxation of norms will also apply to any rescheduling in payment of debt obligation done by the issuer, prior to the due date, with the approval of the investors/lenders, and will extend till the period of moratorium by the RBI, however, appropriate the disclosure is in this regard, Sebi said.

Sebi said it has received requests from the Association of Mutual Funds of India (Amfi) and the Indian Association of Alternative Investment Funds (IAAIF) requesting an extension of the deadline for implementation of the Code as the prevailing situation resulting from the pandemic makes it challenging.

The request letter from Amfi and IAAIF said, due to a situation created by the COVID-19 pandemic they will not be able to effectively monitor and intervene at appropriate situations with the management of the investee companies. Also, it would be difficult to engage with the boards of the investee companies during such trying times.

Sebi said, after taking into consideration the representations, it has now been decided to extend the implementation of the circular on Stewardship Code to July 1, 2020.

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