| Foreign funds have shown interest in taking over the debts and giving fresh loans to companies whose debt has been restructured through the corporate debt restructuring package. Hermes, a German insurance firm has also shown interest in the CDR procedure.
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| “Two foreign funds have approached the CDR cell. They have shown interest in investing in companies whose debts have been restructured under CDR. These funds could either buy out the existing lenders’ at a discount or provide additional assistance to the companies. In case of fresh assistance they could get a priority over the existing lenders,” said Industrial Development Bank of India’s chief general manager Siby Antony. These funds had a discussion with IDBI executive director J N Godbole.
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| He was speaking at a seminar of “CDR mechanism and Asset Reconstruction Company”.
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| Sources also said Hermes which gives guarantees to some of the German banks which give loans to the Indian corporates have also expressed their interest in joining the CDR.
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| “They cannot have the security of the Indian companies. They are looking at the arrangement with the security trustee mechanism,” sources said.
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| Meanwhile foreign banks will join the CDR at the end of November when the amended inter creditor agreement would be signed. Currently 64 public and private sector banks are members of CDR.
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| The core group of CDR has also approved the admission of ARCIL, the asset reconstruction company set up by SBI, IDBI and ICICI Bank and also the IFCI promoted ARC.
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| Speaking at the conference ARCIL president and chief operating officer S Khasnobis said, “Even as the net NPAs in India has shown a decline due to increased provisioning by banks, the gross NPAs have shown a rise. This is because not much attention has been made to the root problems. The total holding cost of NPAs is at 7.25 per cent. With a net NPA of Rs 47,000 crore in the financial system, the total holding cost is at Rs 3500 crore which would represent 25 per cent of the net profit of the Indian banking system.”
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| Currently wilful default accounts cannot be taken by the CDR. “There are around 1,500 cases of wilful default. However in many of the cases this has been used as a threat by banks to get the money back- particularly lenders with small exposures. Many of the cases of wilful default have not been so declared by the bigger institutions and banks. We have bought this to the notice of the RBI. A panel has suggested to the RBI that in genuine cases, where 75 per cent of the lenders agree to restructuring, these cases could be taken up by CDR,” said Antony. |
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