Banks have not referred any account for recast to the corporate debt restructuring (CDR) cell in the three months to June, sources told FE. According to sources, the cell has been conducting meetings as usual but with no new cases to discuss. “There are no pending cases at the cell and banks have referred no new case after March 31,” said a CDR cell official.
From April 1, all restructured loans will have to be classified as non-performing assets (NPAs) attracting a provisioning of 15% of the loan outstanding, from the earlier requirement of 5%
RK Bansal, the executive director at IDBI Bank, said that recasts have dried up because banks do not want to risk extra provisions for stressed companies. “CDR route will be taken henceforth only for companies where the only way of protecting the value of the asset is through a recast.”
Since inception in 2001, the CDR cell has restructured 520 cases worth R3.8 lakh crore out of 647 cases worth R4.5 lakh crore referred to it.
Ambit Capital said in a report on Monday that it analysed the financial performance of a sample of 24 companies that have been restructured under CDR over FY12-14 with an outstanding debt of R1 lakh crore as of FY15. It analysis shows that restructuring has hardly helped as almost all the companies have seen continued stress on their interest coverage ratios and debt-to-equity ratios.
“These restructured companies are mostly from metals, infrastructure and EPC categories tha are heavily dependant on economic revival. Since recovery is still a couple of quarters away, the pain is not yet over for these sectors,” Bansal explained.
At State Bank of India (SBI), the principle behind restructuring after the end of forbearance is to look for cases that have strong chance of revival. PK Malhotra, deputy managing director at SBI, said that following the end of forbearance on restructured assets, the bank would not like to restructure marginal cases or cases that have remote possibilities of revival. “Only strong cases will be restructured now,” he said.
According to RBI data, stressed advances — restructured assets and NPAs — have risen to 11.1% of the total advances in March 2015 from 10.7% in September 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 R10 crore and above.