Securities and Exchanges Board of India, SEBI, has now asked banks to disclose loan divergences within 24 hours of their having received the report from RBI. This is meant for banks whose stocks are publicly traded. This is meant to keep the shareholders of the banks in the loop as to what is happening with the loan portfolios of the banks instantly and not to wait till the bank reports them along with their annual reports, as has been happening so far.
SEBI has directed the banks to “…make disclosures of divergences and provisioning beyond specified threshold not later than 24 hours upon receipt of the Reserve Bank’s Final Risk Assessment Report …”
SEBI has said the assessment report by the regulator is price-sensitive and has to be brought to the knowledge of the shareholders immediately.
As per RBI’s instructions to banks information about provisioning, if in its assessment the additional provisioning exceeded 10% of a bank’s profit before provision, then contingencies have to be disclosed. Similarly, if additional non-performing assets (NPAs) were more than 15% of their reported NPAs, then these have to be reported as well. But these were being complied by the banks by including such information in their annual reports.
This issue is not new. Two years back, the SEBI had questioned three banks, Axis Bank, ICICI Bank and Yes Bank—for inadequate disclosures regarding divergences and provisioning. The banks responded by saying that RBI had advised that the information on divergences was to be kept confidential and that was the reason for their non-disclosure.
SEBI has possibly addressed this issue now by issuing its new instructions to the listed banks after due consultations with the RBI. This is yet another move by the exchange regulator to bring in transparency in the interest of the shareholders.