CDR panel to focus on foreign banks inclusion

The four-member committee to review the corporate debt restructuring (CDR) mechanism, set up by the Reserve Bank of India (RBI) and headed b...

The four-member committee to review the corporate debt restructuring (CDR) mechanism, set up by the Reserve Bank of India (RBI) and headed by Deputy Governor Shyamala Gopinath, is reviewing a gamut of issues, including the participation of foreign banks in the forum and the negligible sacrifices being made by promoters.

The Gopinath panel has already had some rounds of talks with institutions and banks, but is expected to submit its report only after further discussions.

‘‘The panel has held discussions with members of the CDR forum on several issues concerning the CDR mechanism, like that of the issue of participation by foreign banks and the success rates of the cases. The deliberations are still on and it will take some time before the final report is submitted,’’ senior institutional sources said.

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The other members of the panel are Indian Banks Association (IBA) CEO, H.N. Sinor, and two RBI chief general managers (CGM) — Anand Sinha and S.S. Gangopadhyay.

The CDR cell had been constituted at the behest of RBI and comprises representatives from almost every bank and financial institution.

The cell had been constituted to help companies which were reeling under huge interest costs apart from being hit by the economic downturn. The biggest beneficiaries of this exercise have been three steel companies — Essar Steel, Jindal Vijaynagar Steel and Ispat Industries.

	FINETUNING CDR

			• IBA chief Sinor, RBI CGMs Sinha, Gangopadhyay in panel • Foreign banks participation under discussion • Total debt worth Rs 65,000 crore restructured • 25 companies better CDR benchmarks

The other issues that are being debated by the panel include those of compensation to be paid by companies whose debt has been restructured and which have embarked upon expansion plans without clearing this debt.

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The panel is also looking at issues like conversion of debt into equity for correcting the gearing, multiple restructuring to the same borrower and negligible sacrifices by the promoters.The review of the CDR mechanism comes at a time when there is a deadlock over the issue of foreign banks joining the CDR forum.

While the foreign banks are interested in joining the forum, they are not keen on sanctioning any additional assistance to companies whose debts are being restructured. The domestic lenders comprising banks and financial institutions are, however, insisting on this.

Ever since the CDR mechanism was kicked off around three years ago, around 150 cases have since then been referred to the cell. Over 100 of these have an aggregate exposure of around Rs 65,000 crore and these have been restructured.