Sebi: Wilful defaulters can’t tap markets

Mumbai: Market regulator Sebi on Thursday notified rules aimed at banning wilful defaulters from raising money from the markets. The rules will impact companies and individuals categorized as 'wilful defaulter' by the RBI. The entities who could be banned include promoters and directors of a company, as well as the company.

The Sebi move comes at a time when the government and the RBI are fighting a menace that is partially responsible for the huge pile-up of non-performing assets (NPAs), mainly in public sector banks. Earlier in March this year, when the controversy around loan default by flamboyant Indian businessman Vijay Mallya was at its peak, the Sebi board had taken a decision on banning wilful defaulters from the market. It has now been notified.

In the past there have been instances when some wilful defaulters, after being banned by banks and other types of lenders from taking more loans, tapped equity and debt markets for funds. In most of those cases, small investors became stuck in the companies.

Among the rules and regulations for which the changes were notified were Issue of Capital and Disclosure Requirements, Issue and Listing of Debt Securities, Substantial Acquisition of Shares and Takeovers and Issue and Listing of Non-convertible Redeemable Preference Shares. The rules came into force from May 25.

Securities and Exchange Board of India ( SEBI )