A working group set up last January 12 has recommended to RBI certain norms which should be followed by Banks and financial institution at the time of reacasting loan given to Corporates / business concern . It is always better to restructure loan but it must be done following prudential norms . RBI has asked for comments of public and stake holder on the report of the Working committee.
The new norms prescribed strict condition which will make the restructuring exercise very top in the coming days. These Norms are prescribed keeping in mind the best practices followed Globally . At present in corporate restructuring Banks allow the corporate to delay the repayment and charge lower interest rate with out classifyin g the loan as Bad . As at the end of FY 12 Indian Banking sector has lined up loan up to USD 12 Billion for restructing which is 156% higher to previous year .Report also suggested to take Personal guarantee of Promoter at the time of any such restructuring . Some of the key feature are as follows :-
1. Conversion of Debt to preference share should be the last resort
2. Conversion should be allowed only up to 10% of the total debt
3. Conversion of Debt to Equity be allowed only for Listed Company
4. Promoters should contribute more in the restructuring package and personal Guarantee of Promoter may be one of the condition
The new norms prescribed strict condition which will make the restructuring exercise very top in the coming days. These Norms are prescribed keeping in mind the best practices followed Globally . At present in corporate restructuring Banks allow the corporate to delay the repayment and charge lower interest rate with out classifyin g the loan as Bad . As at the end of FY 12 Indian Banking sector has lined up loan up to USD 12 Billion for restructing which is 156% higher to previous year .Report also suggested to take Personal guarantee of Promoter at the time of any such restructuring . Some of the key feature are as follows :-
1. Conversion of Debt to preference share should be the last resort
2. Conversion should be allowed only up to 10% of the total debt
3. Conversion of Debt to Equity be allowed only for Listed Company
4. Promoters should contribute more in the restructuring package and personal Guarantee of Promoter may be one of the condition
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