Banks for lowering of the CDR threshold

Banks want the threshold limit for referring cases to the corporate debt restructuring (CDR) cell to be pared to Rs 15 crore from Rs 20 crore at present.

Lowering the bar will allow more potentially viable cases of non-performing assets to be considered for debt restructuring.

"Once the threshold limit for referring cases to the cell is brought down, more corporate debt restructuring cases can be considered. This is the demand of the system," T Narayansami, chairman & managing director, Andhra Bank, said prior to the signing of the bank's corporate agency agreement with the Export Credit Guarantee Corporation of India.

CDR is a non-statutory voluntary mechanism based on debtor-creditor and inter-creditor agreements and covers only multiple accounts/ syndication/ consortium of accounts with outstanding exposure of Rs 20 crore and above by banks/institutions. The system is applicable to standard and sub-standard accounts.

However, potentially viable cases of NPAs get priority. In no case, the request of any corporate indulging in wilful default or malfeasance is considered.

According to R Balakrishnan, executive director, Andhra Bank, the Small Industries Development Bank of India is likely to formulate a scheme for debt restructuring for small-scale industries.

The RBI, in its latest annual policy, had proposed a mechanism for debt restructuring for medium enterprises. A special group was to be constituted by the apex bank to suggest appropriate operational guidelines in this regard.

Ever since its (CDR) inception about 20 months ago, banks and institutions have managed to prevent assets aggregating about Rs 65,000 crore from going to the seed even as liabilities of corporates, which were affected by internal and external factors, have been restructured.