Public sector banks are likely to examine all cases of corporate debt restructuring (CDR) in the wake of rising non-performing asset (NPA) levels at different state-run lenders and to ensure that such cases of recast were done for genuine reasons.
Alarmed by the rise in discrepancies and frauds, the government has also directed banks to closely monitor these accounts, fearing that a chunk of it could turn unproductive with the slowdown in the economy.
Under CDR, bankers extend the loan repayment period, cut lending rates, offer a repayment holiday and sometimes forego a part of the money owed to them.
Banks restructured over Rs 75,000 crore loans under the CDR scheme in 2013-14, nearly double the level in the previous fiscal. However, lenders still fear that a large chunk of this amount could turn unproductive for them.
"The exercise may be undertaken to ensure that restructuring of debt in companies were done for genuine reasons and that there have been no favours given," a senior government official said.
Banks have also decided to ask promoters of companies seeking corporate debt restructuring for a list of personal assets, which will be charged to the lending banks to ensure that banks have sufficient collateral to cover their loans in case of defaults.
"It needs to be seen that only genuine cases were taken up for the CDR exercise and no wilful defaulter has got away in the process," the official said.
The government has also asked banks to be cautious while undertaking CDR exercise.
ABG Shipyard had in March worked out a Rs 10,000-crore debt recast deal. The company will receive Rs 650 crore infusion from lenders by this month-end, making it the second biggest loan recast in recent times after the Rs 13,500-crore revamp of construction major Gammon India in July 2013.