CDR case flow to stay subdued in Q4

According to CDR data the number of cases referred in Apr- Dec 2014 declined sharply to 22 (for debt involving Rs 22, 900 crore) from 84 cases

Showing signs of stabilisation in asset quality, the flow of cases  to Corporate Debt Restructuring (CDR) in expectecd to be slow in fourth quarter ending March 2015. It is contrary to expectation that  lenders may send many cases for revast before window for forbearance (benefit in provisioning) closes after Mar 2015.

R K Bansal, head of CDR forum and exeuctive director IDBI Bank said the feedback from member banks indicates that there may not be spurt in references in Q4.  

According to CDR data the number of cases referred  in April- December 2014 declined sharply to 22 (for debt involving Rs 22, 900 crore) from 84 cases (for debt involving Rs 1, 09, 600 crore) in April-Decemmber 2013.

Most of restructuring work for corporate loans across  sectors has happened in over last two years. However, risk of slippages remains high in infrastructure sector, another public sector bank executive said.

Not many cases are left to be dealt under CDR. The process is stringent and consume more time compared to corrective action plan under RBI new rules  for early detection and resolution for disterssed cases.

RBI has made it mandatory for banks to firm up corrective action plan (CAP) for  loans where payments remain due for over 60 days. Banks prefer to tackle corporate stress under CAP regime, bankers said.

Banks’ ratio of restructured assets to gross advances stood at 5.9 per cent in March 2014, compared with 5.8 per cent a year ago. In absolute terms, the restructured assets amounted to Rs 3,57,900 crore at end of March 2014, RBI data showed.

The large amounts of stressed assets (gross non prrforming loans plus restructured loans) on balance sheet has put huge pressure on profitability of banks. Banks have to make provision for stressed laons and also reverse interest income booked for NPAs.

Thus the total stressed assets amounted to Rs 6,09,000 crore  at the end of March 2014,  according to RBI data.