Trust and transparency: Blockchain Based Platform Ensures Seamless Monitoring of Debentures

Blockchain Based Platform Ensures Seamless Monitoring of Debentures

In April 2022, NSDL launched a blockchain-based platform for the Debenture Security & Covenant Monitoring. This platform allows corporate bond issuers and debenture trustees to manage the entire life cycle of issuance of corporate bonds, including monitoring the security given and the covenants. This platform is highly secure and provides timely information to investors, while also reducing operational costs and achieving standardization in the data exchange process. It aims to foster discipline and transparency within this market segment. The platform is first of its kind implementation of block chain technology in the Corporate Bond Market in India as well as the world

SEBI Regulatory Direction For DLT system

On August 13, 2021, SEBI outlined protocols for listed debenture Issuers, Debenture Trustees (DTs), Credit Rating Agencies to record and validate the information pertaining to secured and unsecured debentures on the ‘Security and Covenant Monitoring’ platform. Key Components of the platform are:

Asset Creation
Asset Due Diligence
Charge creation and recording of charge
Covenant Recording and Monitoring
Cashflow Recording
Periodic Due Diligence of assets
Credit Rating Actions
Redemption and charge closure

As per SEBI guidelines, to ensure asset uniqueness in the DLT system, each security offered by the Issuer will be assigned a system-generated unique identifier (Asset ID), consisting of a 12-digit alphanumeric string for data exchange and verification among depositories.

Application Eligibility For Stakeholder Involvement

All listed issuers planning to issue non-convertible securities are required to record the details in the system before activation of ISIN. The platform facilitates the recording and verification of assets, covenants, charges etc.

Registration Procedure For DLT System

Issuers, Debenture Trustees (DT) and Credit Rating Agencies (CRA) can get registered on NSDL’s DLT system. To initiate the registration process, users must furnish necessary information as requested in the user registration form and send it to NSDL. Once NSDL validates the information, access to the DLT system is provided to respective users.

Benefits of DLT Platform

Highly Secured
Maintain a unified view and single source of record for all the involved parties
Maintain transparency
Reduce operational cost
Achieve standardisation in the data exchange process
Build investor confidence