The Securities and Exchange Boards of India, better known as Sebi has asked the various depositories to create, maintain and even to host a system that will be based on the principles and technology of the distributed ledger technology or the DLT.
As we all know, this is better known as Blockchain Technology and according to the instructions of Sebi, the depositories have been instructed to make use of blockchain technology in order to monitor and even record the entire creation process of securities. They have also instructed further to monitor the details of the legal formalities and details of the securities which are non-convertible.
Based on the recommendations of various authorities and other official bodies, Sebi has instructed to carry out the process for creating a platform that will be useful for monitoring covenant monitoring and for different security purposes for the depositories who will be using the services provided by Sebi.
The system will also be adept at recording different points of information such as covenant, asset cover and creation of security, along with payment of interest and redemption charges for securities which are non-convertible. The platform will also be responsible for information in relation to matters concerning credit ratings and accompanied by various functions related to the platform. For instance, these functions include, covenants, asset cover and a thorough periodical monitoring and observation of security cover.
They have instructed the depositories to provide their login credentials in the most secure format to CRAs, which are also known as Credit Rating Agencies, issuers, DTs or better known as Debenture Trustees and many others. Their main objective for instructing them to do these things is to make sure the requisite information present on the system is recorded and verified properly, without leaving any room for error.
They are also willing to utilize the system of the platform in order to deploy adequate measures so as to make sure that the security and the integrity of the data is completely maintained and safeguarded against all odds. In hopes of achieving a system which will have complete compatibility through integration and maintenance, Sebi has asked the depositories to exchange and share information among one another. This announcement was made public by Sebi last Friday.
The depositories have also been asked by Sebi to develop a mechanism for alerting purposes, which they would require to send to the stakeholders for the purposes of acceptance, submission and also for the rejection of alerts and other related information for various types of compliances which can be generated on a periodic basis or even generated on the basis of some kind of an event.
In addition to that, they have made other provisions as well, keeping in mind various circumstances that generally might occur in case of such types of activities in which Sebi is engaged. Moreover, as a government regulatory body, their responsibilities are huge as these government officials and institutions are accountable to the public. Traditional systems of governance in India may not be as adequate or well equipped in their approach so that they can take care of complicated tasks without making any minor mistakes.
The proposed system has made such provisions where, in case the issuer, by some mistake, fails to inform the real-time status of payment of redemption amount or interest amount for that matter, the DTs or the Debenture Trustees will need to be required to seek and confirm the status of the aforementioned payment directly from the issuer. Also, they will have an option to conduct an independent investigation into the matter from investors or from the bank and then they need to determine the status on their own.
Sebi announced that based on the assessment, the Debenture Trustees will then have to update in the system all the details they have gathered regarding the payment status of the non-convertible securities. In order for this to take place, the DTs will have 7 working days of the payment of interest or 9 working days of redemption or maturity date.
Blockchain technology is, in that respect, extremely efficient and flawless. With the help of technological advancements such as smart contracts and secure cryptographic keys which the blockchain system is basically built upon, various complicated activities are made easier through automated software such as this one. The additional benefit of using blockchain is that it is less expensive and extremely reliable. That is exactly why blockchain is a perfect technology for maintaining real-time records and also in carrying out necessary functions without any hassle.
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