India's NSDL has Launched a New Blockchain-based Platform to Improve NCD Market

​India's NSDL (National Securities Depository Ltd) has launched a new blockchain-based security and covenant monitoring platform which promises to enhance transparency in the NCD (non-convertible debenture) market.

SEBI (Securities and Exchange Board of India) had directed depositories to develop the new system in August last year. Last month, the regulator issued operational guidelines on the use of the new system. 

The new platform is designed to capture the process of NCD creation, continuously monitor covenants and asset cover, and track credit ratings of NCDs – providing an immutable and verifiable audit trail of transactions between trustees and issuers.

The platform enables movable assets such as furniture, equipment, and inventory as well as current assets such as advances and receivables to be tracked at the portfolio level, where a 12-digit alphanumeric string will be assigned to each asset as a unique ID.

Information on collateral assets and asset cover which was previously stored in centralised databases will be cryptographically signed, time-stamped, and recorded on a blockchain ledger.

India's two depositories, NSDL and CDSL (Central Depository Services Ltd) control the two nodes responsible for network maintenance, however other entities will in future also be able to join the network and establish their own nodes.

Under last month's guidelines from SEBI, issuers are required to record NCD issuance details in the new system before the ISIN can be activated. For outstanding NCDs, issuers have until 30 September 2022 to enter the details into the new system.