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Indian securities Watchdog to introduce system for handling financial instruments

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Within the first quarter of next year, India's securities authority intends to rely heavily on distributed ledger technology for the monitoring and recording of financial instruments.

India’s securities watchdog plans to incline heavily on distributed ledger technology for the monitoring and recording of financial instruments, and recording of financial instruments during the start of next year. 

The securities and Exchange Board of India (SEBI) declared on Wednesday its plan to launch a system for “security and covenant monitoring” for non-convertible debentures (NCDs) by April 1, 2022. It states an important move for the use case of Blockchain within India’s financial ecosystem and backs other important institutions in grip with the technology for increased systems efficiency. NCDs are known as financial instruments that understand a debt obligation is a long-term instrument with a feature that lets it to be cashed in for shares at a later date with keeping the circumspection of the owner. Debentures that cannot be changed into shares are known as “non-convertible” products.

The system will follow on covenants terms were put into debt agreement and will control the credit ratings of the NCDs. The system will give important permission to trustees, issuers and credit rating agencies to update transaction data. Meanwhile, the data will be approachable to stock exchanges and depositories to provide for a more transparent process. Data stored will be cryptographically signed, time-stamped, and eventually added to the ledger will be entirely encrypted and will be shared only with necessary stakeholders on a “need-to-know basis,” SEBI revealed in its statement. 

DLT has the potential to provide a more resilient system than traditional centralized databases and offer better protection against different types of cyber-attacks because of its distributed nature, which removes the single point of attack,” the watchdog said. 

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