In a bid to make revival of bad loans easier for banks, the Reserve Bank of India on Thursday revised the guidelines for Strategic Debt Restructuring (SDR) and Joint Lenders’ Forum (JLF). Banks should consider using SDRs only in cases where change in ownership is likely to improve the economic value of the stressed asset and the prospects of recovering dues.
RBI also said banks going in for SDR should make provisions to the tune of 15% of the loan’s value, to tide over possible erosion in the value of the equity they acquire in lieu of debt and residual loans.
It reduced the minimum percentage of shareholding to be initially divested by the lenders to 26% of the shares of the company and not necessarily 51%. This will give banks the option of exiting their remaining holdings gradually as the company turns around, keeping the ‘right of first refusal’ for the subsequent divestment of their remaining stake with the new promoter.
To ease participation of lenders under JLF, the proportion of lenders, by number, required for approving the CAP (Corrective Action Plan) has been reduced to 50% from earlier 60%. The approval of 75% of creditors by value remains. SBI and ICICI Bank, will continue to be permanent members of JLF, irrespective of whether or not they are lenders in the particular JLF.
RBI said the revisions will take prospective effect. Till date, the reported gross NPAs of Indian banks stand at around `3 lakh crore, while restructured assets (under CDR and bilateral channels) together would constitute almost double that amount.