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Banking stocks are gaining across the exchanges after the Reserve Bank of India (RBI) gave a nod to the banks to take control of debt-laden companies by existing debt into equity, if a debt restructuring fails to revive them within a timeframe. CLICK HERE FOR FULL REPORT
In cases of restructuring of accounts, borrower companies are not able to come out of stress due to operational/ managerial inefficiencies despite substantial sacrifices made by the lending banks. In such cases, change of ownership will be a preferred option. Henceforth, the Joint Lenders’ Forum (JLF) should actively consider such change in ownership under the above Framework issued vide the circular dated February 26, 2014. Post the conversion, all lenders under the JLF must collectively hold 51% or more of the equity shares issued by the company.
To ensure more stake of promoters in reviving stressed accounts and provide banks with enhanced capabilities to initiate change of ownership in accounts which fail to achieve the projected viability milestones, banks may, at their discretion, undertake a Strategic Debt Restructuring (SDR) by converting loan dues to equity shares.
Among banking stocks, Axis bank, ICICI Bank, YES Bank, Federal Bank, Bank of India, SBI, Canara Bank, Punjab National Bank and Kotak Mahindra Bank are trading higher between 0.5-1.5% on the BSE.
