You are here: Home » Companies » News
Business Standard

Just 1% firms keen on one-time debt recast as biz outlook improves: Crisil

This is despite the fact that two-thirds of Crisil-rated entities are eligible for restructuring, based on Kamath Committee parameters

Topics
Debt recast | Bank loans | Crisil

Abhijit Lele  |  Mumbai 

debt restructuring, loans, recast, moratorium
In August 2029, Reserve Bank of India (RBI) had formulated OTDR scheme for companies under stress due to the Covid-19

With improving business sentiment and ongoing gradual recovery, only one per cent of rated Indian have shown interest in one-time debt restructuring (OTDR) scheme, according to rating agency

In August 2020, the Reserve Bank of India (RBI) had formulated OTDR scheme for under stress due to the Covid-19 pandemic. It had set up a panel headed by former ICICI Bank chairman K V Kamath to suggest norms for OTDR.

The rating agency in a statement said its preliminary analysis of 3,523 such non-MSME rated by it indicated as many as 99 per cent of companies (excluding MSMEs) are unlikely to opt for restructuring.

Only about one per cent indicated that they would apply for OTDR. This is despite two-thirds of the rated entities being eligible based on the parameters proposed by Kamath Committee.

ALSO READ: RBI sets up innovation hub for financial sector under Kris Gopalakrishnan

Subodh Rai, Senior Director, Ratings, said, improving business sentiment on account of increased economic activity over the past few months, and expectation of a sharp recovery next fiscal are persuading borrowers to skip OTDR.

Another deterrent is the impact on the borrower’s long-term credit history. Accounts of those opting for OTDR would be classified as restructured advances by lenders, which could impact their ability to raise debt in future, he said.

Lenders have to finalise and invoke OTDR for corporates by end of December 2020.

said that more than three-fourth of debt consists of short-term working capital facilities for 44 per cent of its rated corporates. In these cases, availing OTDR would have negligible benefits, as the resolution plans under this scheme are focused on deferring principal repayment of long-term debt.

Such borrowers, instead of opting for debt recast, may prefer to seek additional working capital financing as announced by the RBI under its Covid-19 regulatory package.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Tue, November 17 2020. 14:28 IST
RECOMMENDED FOR YOU
.