Bankers have asked the Reserve Bank of India (RBI) and the finance ministry to tweak the corporate debt restructuring (CDR) norms, such as allowing turfing out the management and changing the covenants of loan agreements. After the failure of schemes such as the strategic debt restructuring (SDR) scheme and the scheme for sustainable structuring of stressed assets (S4A), Indian bankers want to return to the at least 15-year-old CDR mechanism to solve the Rs7-trillion toxic debt problem. Bankers need powers under this rule to push errant borrowers to give up ownership and voting rights, effect a management change and even split the debt into sustainable and unsustainable parts to better restructure loans. A structure which allows lenders to restructure debt to a sustainable level would be very helpful. Along with the insolvency process, stressed accounts could be resolved, which would preserve value for lenders.

(Live Mint)