Mumbai, Aug. 4: The Securities and Exchange Board of India (Sebi) today asked listed companies to make public defaults on loans taken from banks and other financial institutions. The rule takes effect from October.

In a circular, the market regulator said listed entities would have to inform the stock exchange any default on the payment of interest or instalment obligations on debt securities, including commercial paper, external commercial borrowings (ECBs) and loans from banks and financial institutions.

Current rules stipulate disclosure on a clutch of instruments such as listed non-convertible debentures and listed non-convertible redeemable preference shares but not loans from banks, which are grappling with bad assets amounting to a gargantuan Rs 8 lakh core.

The companies will have to inform stock exchanges about the date of default as well as the date of making such disclosure.

They will have to reveal the name of the lender, number of investors in the security as on the date of default, details of the obligation, current default amount and gross principal amount on which the default has occurred.

"The entities shall make disclosures within one working day from the date of default at the first instance of default," in a specified format, Sebi said.

Listed entities would also separately provide information pertaining to defaults to the credit rating agencies concerned in a timely manner.

According to Sebi, default will mean the non-payment of interest or principal amount in full on the pre-agreed date. According to the RBI definition, an asset is classified as an NPA if a borrower is unable to pay the interest or principal for 90 days or more.

In the Insolvency and Bankruptcy Code, a default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor, as the case may be.

"Corporate houses in India are primarily reliant on loans from banks. Many banks are under considerable stress on account of large loans to the corporate sector turning into stressed assets, NPAs. Some companies have also been taken up for initiation of insolvency and bankruptcy proceedings," Sebi said while explaining the rationale for the move.