Banks, Fis Form Corporate Debt Revamp Teams

Public sector banks and financial institutions have jointly set up two corporate debt restructuring (CDR) teams to ensure a timely and transparent mechanism for restructuring debt of potentially sick corporates.

This restructuring is outside the purview of the Board for Industrial and Financial Reconstruction, debt recovery tribunals and other legal proceedings. Further, it is applicable only to multiple banking accounts, syndicates, consortium accounts with an outstanding of over Rs 20 crore.

The core group comprises chiefs of institutions, banks and a Reserve Bank of India (RBI) representative, while the other team, the CDR empowered group, will comprise middle-rung brass of banks and FIs.

While the empowered group will screen the restructuring proposals, the core group will take a final view on them.

The chairman of the core group is the Industrial Development Bank of India's chairman and managing director (CMD) P P Vora. The other members of the group are ICICI managing director and chief executive officer K V Kamath, State Bank of India chairman Janaki Ballabh, CMD K V Krishnamoorthy, Punjab National Bank CMD S S Kohli and RBI chief general manager M R Srinivasan. The core group held its first meeting on December 6, 2001.

The CDR empowered group, which had its first meeting on December 21, 2001, will decide on the individual cases of corporate debt restructuring. IDBI executive director T M Nagarajan was elected chairman of the group.

The financial institutions are facing a problem of lack of consensus on restructuring of loans.

"Projects require funding at the right time. If there is a delay then the whole project turns unviable. In many cases, where consensus among institutions could not be build up, infusion of funds would get delayed," said senior institutional sources.

"Banks and FIs are looking forward for the effective working of the CDR. This may help many of the assets from turning into non-performing assets. The major lenders can now force smaller lenders to take a decision, since many of them are not keen on additional fund infusion or go in for a restructuring as they did not have much to lose," said a senior banker.