Background

Issuers/RTAs are advised to refer to CDSL Circular no. CDSL/OPS/RTA/ POLCY/2022/67 dated March 30, 2022, regarding SEBI on “Operational guidelines for ‘Security and Covenant Monitoring’ using Distributed Ledger Technology (DLT).
This circular is applicable to all issuers proposing to issue non-convertible securities on or after April 01, 2022, shall record the details in the system before activation of ISIN. Further, in order to ensure compliance, Depositories are advised to allot or unfreeze an existing ISIN (in case of re-issuance), as applicable only after confirming recording of above-mentioned information”

SEBI Guidance

SEBI released a circular on Securities and Covenant Monitoring using Distributed Ledger Technology on 13 Aug 2021 to strengthen the process of security creation, monitoring of securities, monitoring of asset cover and covenants of non-convertible securities and recommended to develop a platform for ‘Securities and Covenant Monitoring’ System by the depositories

SEBI Press release

https://www.sebi.gov.in/media/press-releases/apr-2022/sebi-issues-operational-guidelines-for-security-and-covenant-monitoring-using-distributed-ledger-technology-dlt-_58133.html

SEBI Circular:

Circular No.: SEBI/HO/DDHS/RACPOD1/CIR/P/2023/003 dated Jan 05, 2023

https://www.sebi.gov.in/legal/circulars/jan-2023/extension-of-timelines-for-entering-and-verification-of-the-details-of-the-existing-outstanding-non-convertible-securities-in-the-security-and-covenant-monitoring-system-hosted-by-depositories_67045.html

Circular No.: SEBI/HO/DDHS/RACPOD1/CIR/P/2022/136 dated Oct 03, 2022

https://www.sebi.gov.in/legal/circulars/oct-2022/extension-of-timeline-for-entering-the-details-of-the-existing-outstanding-non-convertible-securities-in-the-security-and-covenant-monitoring-system-hosted-by-depositories_63648.html

Circular No.: SEBI/HO/MIRSD/MIRSD_CRADT/CIR/P/2022/67 dated May 19, 2022

https://www.sebi.gov.in/legal/circulars/may-2022/revised-format-of-security-cover-certificate-monitoring-and-revision-in-timelines_59051.html"

Circular No.: SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2022/ 38 dated Mar 29, 2022

https://www.sebi.gov.in/legal/circulars/mar-2022/operational-guidelines-for-security-and-covenant-monitoring-using-distributed-ledger-technology-dlt-_57331.html

Circular No.: SEBI/HO/MIRSD/MIRSD_CRADT/CIR/P/2021/618 dated Aug 13, 2021

https://www.sebi.gov.in/legal/circulars/mar-2022/-security-and-covenant-monitoring-using-distributed-ledger-technology_51855.html"

Applicability for Stakeholders

Accordingly, with effect from April 01, 2022, the recording of asset details (and their verification), allotment, listing and payment of interest or redemption shall be available in the CDSL system.

All issuers proposing to issue non-convertible securities on or after April 01, 2022 shall record the details in the system before activation of ISIN.
Further, in order to ensure compliance, Depositories are advised to allot or unfreeze an existing ISIN (in case of re-issuance), as applicable only after confirming recording of above-mentioned information.
Further, where an issuer is unable to comply with the above requirement, it shall provide an explanation to Depositories. However, this dispensation is available only till July 01, 2022, after which ISIN shall not be allotted to an issuer.
For existing outstanding non-convertible securities, issuers will be required to enter the details into the DLT system on or before January 31, 2023 and DTs shall verify the same by February 28, 2023.

Please note that all the existing process of activation of ISINs will remain the same.
To begin with, the following assets shall be tracked at portfolio level and no specific parameters for the underlying assets would be captured:
a. movable assets viz furniture, equipment, inventory etc.
b. current assets viz portfolio of advances/ receivables, etc.
c. any other asset of similar nature.

CDSL’s DLT system

CDSL has created Security and Covenant Monitoring System using Distributed Ledger Technology (DLT) technology commonly known as Blockchain. CDSL’s Security and Covenant Monitoring System helps various stakeholders like Issuers, Credit Rating Agencies (CRA) , Debenture Trustees (DTs) to create and monitor security, monitor asset covers and covenants of non-convertible securities.

Registration Process

Please find the registration process of ‘Security and Covenant Monitoring’ using in CDSL.
Please provide the details from the registered email IDs in the attached excel (Annexure A) to [email protected] for creating Admin logins for the DLT system.

Please note that currently the following entities will have to create their logins to access the DLT system :
1. Issuer
2. Debenture Trustee (DT)
3. Credit Rating Agency (CRA)

CDSL based on the data made available in the attached template will create “ADMIN” login with admin rights for the entity

Creation of Users by Entities

CDSL will be allotting Admin user for the entities based on the details provided at registration

Process for ADMIN login:

Admin users can access the CDSL’s DLT portal: https://dltcommand.cdslindia.com to create new users in the system

Admin has to create at least two users i.e. Maker and checker in the system.

CDSL DLT User Creation Manual

Creation of Assets & Bonds

Creation of Assets, Covenants and Bonds issuance are in a separate webpage link: https://dltbond.cdslindia.com/login

Issuer Users have to first create the asset in the system (Maker has to enter and checker to verify.)

Once the asset (security is created), please enter the details of the non-convertible securities to be issued and link the asset created to this NCD.

CRA and Debenture Trustee using its login needs to review and accord his approval in the system. (Maker and checker both).

CRA

This completes the process of asset ID creation.

Queries regarding the DLT process may sent to: [email protected]

Securities and Covenant Monitoring