CORPORATE DEBT REVIEW

BE/RBI/21/2017

RBI has set up an Oversight Committee to with an aim to clear the stressed Corporate Loans, which has been now advised to review 12 Corporate Accounts.  Additionally 6 more accounts in the coming days with debt of Rs. 10,000 crore would be added, for review, under Scheme for Sustainable Structuring of Stressed Assets (S4A).  Major accounts relate to Textile, Infrastructure and Road Sectors.  OC has already cleared stressed debt to the tune of Rs. 25,000 crore in 12 accounts.

The OC now has been added with three more members, thus making the total to 5.  The panel is empowered to vet restructuring proposals for big-ticket stressed loans and thus, in addition to the task of taking these cases, under S4A, the committee would also consider debt recast proposals for entities with borrowings over Rs. 500 crore.

It is important to note that RBI has already identified around 50 to 60 accounts to be referred to the National Company Law Tribunal (NCLT) for initiating necessary action under Insolvency and Bankruptcy Code.

Under S4A scheme, the debt of a stressed accounts will be divided in to two parts viz  Sustainable and Unsustainable.  The unsustainable part would be converted to equity/quasi equity instruments, when the business improves and shows stability.  The borrower in turn would be expected to pay only the interest part and the repayment portions on the sustainable part of the loan.  The Sustainable part of the loan should at least form 50 per cent of the debt under the current rulings which is likely to be increased.

Author: Admin Bankedge

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