More disclosure possible on debt recast under JLF

With JLF launch in April 2014, action has shifted from Corporate Debt Restructuring, with banks forming 355 JLFs up to Feb 2015

Banks might have to disclose more information about loans being restructured under a Joint Lenders Forum (JLF), as the Reserve Bank of India reviews the regime for early detection and restructuring of stressed assets, introduced a year before.

The earlier focus was on stabilising the new system (JLF). Now, the regulator will look at putting more analytics and disclosures on loans going for restructuring under the forum, RBI Deputy Governor S S Mundra told reporters on the sidelines of a conference organised by the National Payment Corporation of India.

After introduction of JLF in April 2014, the action has shifted from the Corporate Debt Restructuring (CDR) Forum. Between July 2014 and February this year, commercial banks formed 355 JLFs for troubled cases. In keeping with their share of overall loans, public sector banks accounted for 254 such cases. The country's largest lender, State Bank of India, was handling 107 cases, as head of a consortium, according to finance ministry data.

CDR, which provided a fresh lease of life to companies till March 2014, began to draw fewer companies as it involved time-consuming processes, reducing the chances of protecting the value of the assets being restructured. A total of 33 cases involving Rs 44,100 crore were referred to the CDR forum in 2014-15.

Bankers said there has been less information about the nature of restructuring, amounts involved and sectors under JLF. CDR was much more structured and ensured steady flow of information.

Mundra had earlier said the feedback suggested implementation of the JLF framework needed improvement at the ground level. Bigger lenders have represented to RBI about non-cooperation from smaller ones. The latter have voiced concerns about being arm-twisted by the bigger ones. Unless there is proper co-ordination between the interested parties, revival efforts are likely to fail.

RBI has taken various steps to improve the system’s ability to deal with corporate and financial institution distress. These include guidelines on early recognition of financial distress, prompt steps for resolution and fair recovery for lenders, a framework for revitalising distressed assets, detailed guidelines on formation of a JLF and on a corrective action plan.

Earlier, in his valedictory address, Mundra said there was excitement about adoption of mobile banking and payments. However, the model has been relatively more successful only in countries where the right environmental factors existed. The reference is to delivery of financial and payment services using mobile devices, rather than its use as an access channel for internet banking and similar activities, he added.