1. As forebearance ends, CDR cell sees no fresh referral

As forebearance ends, CDR cell sees no fresh referral

Starting April, any fresh restructured loan attracts the same provisions as non-performing assets (NPAs) at 15%

By: | Mumbai | Published: April 22, 2015 12:16 AM

Banks have not referred any account for recast to the corporate debt restructuring (CDR) cell in April, sources told FE, probably with a view to avoid making a 15% provision on restructured assets.

According to sources, the cell met this week but had no new cases to discuss. “The meeting reviewed performances of recast cases with regard to the projections made in viability reports. Moreover, there aren’t any pending cases as all were settled last month,” a banker said.

Starting April, any fresh restructured loan attracts the same provisions as non-performing assets (NPAs) at 15%. Earlier, RBI had allowed banks to classify such accounts as standard restructured and provide 5%.

At State Bank of India (SBI), India’s largest bank, the principle behind restructuring after the end of forbearance is to look for cases that have strong chance of revival. NK Chari, deputy managing director, SBI had recently told FE that after the end of forbearance on restructured assets, the bank would not like to restructure marginal cases or cases that have remote possibility of revival post-recast. “Stronger cases will be definitely considered,” he said.

CDR-cases

Nirmal Gangwal, founder and managing director at Brescon Corporate Advisors — a company that advises clients on turnaround plans — said that since RBI has allowed cases referred before March 31 eligible for the forbearance, joint lenders’ forums (JLFs) are busy clearing the backlog. “Now onwards, most cases would be settled at the JLF level and only a few large cases with too many lenders, would be sent to the cell.”

According to RBI data, stressed advances — restructured assets and NPAs — have risen to 10.7% of the total advances in September 2014 from 10% in March 2014.

The CDR cell works on the principle of approvals by super-majority of 75% of creditors (by value) which makes it binding on the remaining 25% to agree to the majority decision and covers only multiple banking accounts and consortium accounts with exposure of Rs 10 crore and above.

Since inception in 2001, the CDR cell has restructured 520 cases worth Rs 3.8 lakh crore out of 647 cases worth Rs 4.5 lakh crore referred to it.

For Updates Check Banking News; follow us on Facebook and Twitter

  1. No Comments.

Go to Top