Bankers talk tough on CDR, promoters to fork out more

In the new scheme of things, promoters of companies seeking easier repayment terms through a corporate debt restructuring (CDR) package will have to fork out 25% of the diminution in the fair value of the restructured account and not 15% as they do now. Moreover, they will have to pledge 100% of their shares and furnish unconditional personal guarantees. These are the decisions of the core group of the CDR cell, which comprises chairmen and managing directors (CMDs) of top public sector banks and CEOs of private lenders.

In all, 17 new norms have been finalised, making recasts more stringent, including those for sanction of additional working capital, in which case the promoter must bring in 10-25% of the amount.

The norms come ahead of RBI’s rules on recast, which will be based on the Mahapatra Committee’s recommendations and are expected next month. The central bank’s rules will be applicable to both bilateral and CDR cell recasts. The panel, among other things, wants promoters to make a bigger sacrifice — of around 15% of the fall in fair value or 2% of the restructured amount, whichever is higher.

The RBI group also feels that any conversion of loans into preference shares should be done only as a last resort. Besides, this conversion of loan into preference shares must be capped at around 10%, it feels. The committee also wants

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