MTNL unable to fund escrow account ahead of interest payment; sovereign guarantee mechanism may be invoked

New Delhi: State-run telecom company Mahanagar Telephone Nigam Limited (MTNL) has informed stock exchanges that it could not fund the escrow account required for the upcoming semi-annual interest payment on its bonds due to insufficient funds, according to a regulatory filing made on Thursday.

An escrow account is a secure, temporary, and neutral third-party account used to hold funds or assets during a transaction until specific, pre-agreed conditions are met. 

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According to the filing, the sixth semi-annual interest payment on the 7.80 percent MTNL Bond Series VIID (INE153A08139) is due on February 24, 2026. Under the structured payment mechanism defined in a tripartite agreement among MTNL, the Department of Telecommunications, and Beacon Trusteeship Limited, the company is required to deposit the interest amount into an escrow account maintained with Bank of India at least 10 days prior to the due date.

MTNL stated that due to inadequate funds, it was unable to deposit the required amount into the escrow account within the stipulated timeframe.

The company, however, clarified that all its listed bonds carry a sovereign guarantee from the Government of India. Under the terms of the tripartite agreement, if MTNL defaults on principal or interest payments, the debenture trustee can invoke the sovereign guarantee, obligating the government to make the payment.

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