The Reserve Bank of India (RBI) has refused to share information about non-performing assets (NPAs) and loan defaulters that the Securities and Exchange Board of India (SEBI) has asked for in the past year, sources told The Economic Times.
The central bank is wary of data leakage if it is shared with more people, thereby impacting business prospects of the companies involved, they added. RBI believes this data is sensitive in nature.
SEBI reportedly sent at least two official requests asking for information to use as evidence in its ongoing investigations. These include disclosure lapses by an indebted company and violation of corporate governance laws at a leading private lender.
This comes after a show-cause notice was sent to RBI governor Urjit Patel by the Central Information Commission (CIC) for not sharing a list of defaulters despite instructions of the Supreme Court.
One of the SEBI cases is about some brokers involved in front-running just before the NPA numbers of a private bank were made public. There is speculation that a bank insider shared this information with the brokers.
Normally, the two regulatory bodies share information regarding the debt market, foreign portfolio investors (FPIs) and oversight in banking, as their jurisdictions overlap. It usually happens smoothly and SEBI gets data within two weeks of sending a request, a source told the paper.
The data SEBI receives from the central bank is filed with the investigation reports of the respective cases, which have to be shared as evidence with the accused. This increases the chances of a leak.
“A potential NPA or a loan becoming NPA might not always mean the end of business for the defaulting company. Hence, disclosing the data could potentially affect the ability of the company to carry out regular business,” one source told the paper.
In cases of insider trading and frontrunning, NPAs are labelled as unpublished price sensitive information (UPSI). If the indebted company is listed, it has to disclose the information to the stock exchanges.
Banks have seen sharp price movements in the stock market around the earnings announcements due to speculation around NPA numbers, in the past two years.
In 2015, SC directed RBI to disclose data of loan defaulters to the CIC. “If CIC gets a positive verdict in the matter, RBI will be forced to share the data with SEBI as well. If the case goes in favour of RBI, SEBI will have to look for other supporting evidence,” the source was quoted as saying.
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