The Reserve Bank of India (RBI) on Tuesday said the proposed debt restructuring mechanism for small and medium enterprises (SMEs) would consider those stressed or sub-standard assets for restructuring where more than one lender has an outstanding exposure between Rs 5 crore and Rs 20 crore.Termed as Medium Sector Restructuring system (MSR), the mechanism would undertake debt restructuring of SMEs on the lines of the existing Corporate Debt Restructuring (CDR) system.According to a report prepared by a special group constituted by RBI, as announced in the annual policy statement of 2004-05, the proposed MSR structure will be a two-tier structure, comprising the MSR standing forum at the national level and MSR empowered group at the state level. An MSR cell would work as the secretariat for the MSR empowered group.The report said: ‘‘Initially, the MSR system will be extended to the SME sector. However, after reviewing the system for one year, it may be extended to cover partnership/proprietorship firms also’’.The Debtor-Creditor Agreement (DCA) and the Inter-Creditor Agreement (ICA) would provide the legal basis for the MSR mechanism. ‘‘Under this clause, both the debtor and creditor may agree to a legally binding ‘standstill’ whereby both parties commit themselves not to take any other legal action during this period,’’ the report said.As per the restructuring package under the MSR system, existing or new lenders may take additional exposures. Such additional exposures may be exempted from provisioning requirements for a certain specified period.
