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Corporate - Restructuring


RBI plans to amend norms to widen corporate debt recast scope

Our Bureau

Mumbai , May 6

THE Reserve Bank of India proposes to widen the scope of Corporate Debt Restructuring (CDR) and make it more efficient.

Under the changes proposed today by the RBI to the existing guidelines, the CDR scheme will be extended to corporates on whom banks and financial institutions have an outstanding exposure of Rs 10 crore as against Rs 20 crore currently. This could bring a larger number of sick units under the ambit of CDR. A corporate coming under the scheme would require the support of 60 per cent of creditors by number in addition to the support of 75 per cent of creditors by value.

This is being done with a view to make the decision-making process more equitable, the RBI said.

This is expected to give smaller lenders a say in the debt restructuring exercise. Until now, larger lenders have been enjoying greater influence in such exercises.

To improve the efficiency of the CDR scheme, it is proposed to link the restoration of asset classification prevailing on the date of reference to CDR cell to implementation of package within three months from the date of approval of the package. This, explained a banker, means that if a CDR scheme is not implemented within three months of its date of approval, the advantages of classification of the assets would not be available to the borrower.

The RBI has also proposed one-time settlement as a part of the CDR scheme to make the exit option more flexible. This has fetched a positive response from bankers.

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