Avoiding the corporate debt restructuring (CDR) route altogether, banks have not referred any fresh loan to the CDR cell in FY16. However, two old cases – Simbhaoli Sugar and Zuberi Fibres, with debt of Rs 800 crore and Rs 75 crore respectively, had been referred to the cell and have been recast in FY16.
Viney Kumar, chairman, CDR cell, told FE that this year, the cell primarily focused on the review and monitoring of the existing accounts. “Earlier, when the cases used to be more, the review used to take the back seat. We have been working more on ensuring that each case should be reviewed at least once a year,” he said.
According to Kumar, at least 90% of the cases have been reviewed already. “Reviews help us determine how the company is performing compared to the CDR projections. It also shows if the promoters have brought in their contribution, created the pledge and divested their non-core assets,” he explained.
Beginning April, any fresh restructured loan attracts the same provisions as non-performing assets (NPAs) at 15%. Earlier, the Reserve Bank of India (RBI) had allowed banks to classify such accounts as standard restructured and provide 5%.
Since its inception in 2001, the CDR cell has restructured 522 cases worth Rs 3.8 lakh crore out of 647 cases worth Rs 4.5 lakh crore referred to it.
Kalpesh Mehta, partner, Deloitte Haskins & Sells, said that bankers have now realised that CDR was not as productive as an SDR in terms of reviving an asset. “They have shifted their focus from short-term relief to long-term fix for their exposure to stressed companies. They are no longer satisfied with just stretching the repayment period during restructuring and are instead in favour of more structural changes by bringing in strategic investor to make the company viable,” Mehta explained.
The RBI had allowed lenders to classify restructured accounts under the restructured-standard category till March 2015. However, from April banks have been instructed to classify restructured accounts as NPAs and, given the continued financial strain across corporate India, chances are the NPA portfolios of some lenders could grow bigger.
According to RBI data, stressed advances — restructured assets and NPAs — have risen to 11.3% of total advances in September 2015 from 11.1% in March 2015.
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.
Further, it covers only multiple banking accounts and consortium accounts with exposure of R10 crore and above. In FY15, the cell approved 30 cases worth Rs 39,230 crore for recast.
