Money & Banking

Bad loan reporting: SEBI tightens norms for banks

Our Bureau Mumbai | Updated on October 31, 2019

Markets regulator SEBI now has a strict framework for banks to report bad loans. The regulator, on Thursday, said that listed banks will have to disclose any divergence in bad loan provisioning within 24 hours of receiving the RBI’s risk assessment report, rather than waiting to publish the details in their annual financial statements. This comes into force with immediate effect.

Banks have been under-reporting bad loans and have even attracted RBI action. The SEBI move was in consultation with the RBI. SEBI said that disclosures in respect of divergence and provisioning will require immediate disclosure as they are material events that could impact stock prices.

“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 RBI’s Final Risk Assessment Report (RAR), rather than waiting to publish them as part of annual financial statements,” said SEBI.

SEBI has issued a format in which such disclosures need to be made. It says that the disclosures are required if a bank’s additional provisioning for 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.

Published on October 31, 2019

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