Loan defaulters face Sebi curbs

RBI, Sebi join hands to stop willful defaulters from raising market funds

New Delhi, Aug 31: Putting its weight behind RBI in dealing with ‘ wilful defaulters’ of bank loans, capital markets regulator Sebi is considering barring such entities from raising funds through stocks and other securities.

“Work is going on this front. We can say that you ( wilful defaulter) can not raise the money from the markets,” Sebi Chairman U K Sinha said.

To tighten the regulatory noose around wilful defaulters, the Reserve Bank has suggested to the Sebi that such entities should be prevented from raising funds through capital markets.

To facilitate such restrictions on entities found to have ‘ wilfully’ defaulted on bank loans, the Reserve Bank is exploring ways to share details of these defaulters with Sebi on a real time basis.

“My own feeling is that we should go along with RBI on this, but the process will take some time,” Mr Sinha said.

“There is a difference between NPA and wilful defaulter. Wilful defaulter means that the bank has already come to a finding and the process has gone to a certain level before someone being called a wilful defaulter,” he added.

As per RBI’s proposal, such defaulters can be barred from raising funds through capital markets, as also through issuance of securities or other avenues under the jurisdiction of Sebi.

Currently, the information about wilful defaulters of bank loans are shared with Sebi and others, includ- ing credit information agencies like CIBIL, on a quarterly basis.

The proposal has come against the backdrop of spiralling bad loans in the banking system, especially fuelled by increasing number of wilful defaulters.

Sharing details on real time basis can better equip Sebi and other agencies to ensure that wilful defaulters identified by banks do not have an opening to raise further funds from gullible investors through the securities market.

As per estimates, the amount of NPAs in the system is worth about 2 lakh crore.