Banks weighed down as debt recast doubles in Apr-Dec
The Reserve Bank of India (RBI), which estimates that around 15-20% of such assets typically turn toxic, is in the process of tightening norms for debt restructuring. In the meanwhile, banks have taken matters in their own hands, deciding that promoters need to make larger contributions to the package and cough up 25% of the diminution in the fair value of the restructured account. Currently, they fork out just 15% and at times even less. Moreover, banks have decided that promoters must pledge 100% of their shares and furnish unconditional personal guarantees. As many as 15-20% of the new cases being referred to the CDR cell are those seeking a second admission into the CDR cell. In the case of a second recast, the account is categorised as a non-performing asset (NPA), except when the net present value (NPV) is protected.
Going by the value of the 99 loans sought to be recast in the nine months to December of R52,784 crore — way above the R67,088 crore referred in 2011-12 — there’s more pain ahead. With many more queuing up for easier terms, banks
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