Loans worth a staggering R62,500 crore have been recast by the corporate debt restructuring (CDR) cell between April and December, a 100% jump over the previous year which witnessed a figure of R31,601 crore. In the nine months to December, the cell received a recast request once in three days, a sign of the severe stress on corporate cash flows.
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.
The new RBI guidelines on restructured assets, based on the recommendations of the Mahapatra Committee, are expected in end-January. The panel has suggested that promoters sacrifice 15% of the fall in fair value or 2% of the restructured amount, whichever is higher. The group also feels the conversion of loans into preference shares should be done only as a last resort and conversion of the part of loan into preference shares must be capped at around 10%.
According to Crisil, loans restructured by Indian banks will stand at sharply to R3.25 lakh crore in financial year 2012-13. The proportion of restructured loans in this period will be around 5.7% of ? advances. The majority of restructuring will be in loans to the state power utilities and the construction and infrastructure sectors.
