No trading restriction on stocks going under bankruptcy, says Sebi
Ajay Tyagi, Chairman, Sebi has said there will be no trading restriction on companies going under IBC. However, he cautioned mutual funds industry to not take NPAs as debt transfer.
- No trading restriction on stocks going for IBC
- RBI recognised 12 defaulters accounting 25% of banks gross NPAs
- NPA not allowed to be shifted to mutual fund portfolio as debt
Sebi won't put any trading restrictions on stocks that are going to IBC (Insolvency and Bankruptcy Code), Ajay Tyagi, Chairman, Sebi, said at a conference in Mumbai on Thursday.
Tyagi said that funds houses must improve due diligence mechanism and must not to rely only on credit rating agencies for the same.
Talking on mutual funds, Tyagi said, “Bad loans should not be shifted to mutual fund portfolio by the way of debt transfer .”
He cautioned mutual funds industry against letting debt funds bulge and asked to improve their due diligence mechanism.
Recently Sebi provided a helping hand to the Reserve Bank of India (RBI) and government in solving Rs 7 lakh crore non-performing assets crisis.
The market watchdog, on June 21, relaxed distressed assets norms for speedy resolution of NPAs. It also relaxed acquisition rules which allows investors to purchase distress assets from banks.
By end of FY17, banks had gross non-performing assets (NPAs) of 9.5% of gross advances valuing up to Rs 7.65 lakh crore.
GNPAs of a total 21 PSBs stood at Rs 6.19 lakh crore, rising by 19.96% compared to Rs 5.16 lakh crore in the similar period of the previous year.
On June 13, 2017, RBI through its Internal Advisory Committee (IAC) recognised 12 accounts for resolution under IBC.
For accounts more than Rs 5000 crore – where 60% or more exposure was already classified as NPA by banks as on FY16 – immediate reference to resolution through IBC will be made.
These 12 defaulters were from sectors like steel, infrastructure and textile mainly. Proceeding of some of the defaulters are commenced under IBC in last week.