The Reserve Bank of India said if acquisition of equity shares by banks for restructuring companies’ results in exceeding the extant regulatory Capital Market Exposure (CME) limit, the same will not be considered as a breach of regulatory limit. In its Guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP) for revitalising distressed assets in the economy, the RBI said the above mentioned breather, however, will require reporting to it and disclosure by banks in the Notes to Accounts in Annual Financial Statements. The JLF must periodically review the account for achievement/non-achievement of milestones and should consider initiating suitable measures including recovery measures as deemed appropriate. According to the RBI, the general principle of restructuring should be that the shareholders bear the first loss rather than the debt holders.

(The Hindu)