New Delhi, March 12 With stress on the financial system and loan defaults a hot topic in India today, the country's markets regulator on Saturday announced a series of steps that will bar wilful perpetrators from raising any more money from the market.
"All wilful loan defaulters will stand disqualified from the board positions as listed companies under the new rules," Securities and Exchange Board of India (SEBI) Chairman U.K. Sinha said at a press conference here after the watchdog's board meeting.
Sinha also said tainted people will also not be allowed to take over the control of other listed companies, nor allowed to float mutual funds or similar monetary entities.
In this regard, he said, the criteria for determining who constitutes a "fit and proper" person in the regulations was also being amended. The bar on wilful defaulters is also on floating instruments like non-convertible debentures and redeemable preference shares.
During the board meeting, which was also addressed by Finance Minister Arun Jaitley, officials were asked to remain alert on the supervision of the markets, particularly in the wake of the global developments.
The issue of loan defaulters at the watchdog's meeting followed the matter being raised at the the board of governors of the Reserve Bank of India (RBI) meeting here with the top brass of the finance ministry.
One of the main topics of discussion at the RBI meeting was the issue of non-performing assets of banks -- which primarily concern loan defaults and wilful defaults by the industry.
"Non-performing assets are of two types," Jaitley said after the RBI meeting, explaining that one is created as the result of a slowdown that can be recovered once the economy turns around, while the other is on account of individual misdemeanours.
"We don't want to create a situation by overstating these incidents that, in turn, will hamper activities," he said, alluding that banks should not be deterred from bona fide fresh lending. "But the rising levels of NPAs is a matter of concern for all of us."
As per recent RBI estimates, the total exposure of commercial banks in terms of gross NPAs, the rescheduled loans and write-offs was 14.1 percent of deposits that works out to around Rs.9,455 billion (around Rs.9.5 lakh crore).
The government is also facing flak following the unexpected exit of industrialist Vijay Mallya from the country, even as a consortium of 17 banks led by the State Bank of India, were seeking repayment of around Rs.9,000 crore that he has borrowed from them.
