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L.N. Revathy

Coimbatore, April 7 Industry insiders feel that in view of the global meltdown and the staggered effect on the Indian economy, the one-time measure of Special Regulatory Treatment in relation to standard accounts should be extended for the entire year.

At present, accounts which are standard as on September 1, 2008 are treated as standard upon restructuring (as per RBI guidelines), if restructuring is taken up before March 31, 2009 and implemented in 120 days.

“The RBI should allow a similar time frame for standard accounts during the current calendar year,” said the Director of Mumbai-based PNR Consulting, Mr Huzefa Sitabkhan. “For instance, if an account is standard as on May 31, 2009 and restructuring is taken up by November and implemented within 120 days, the account can be treated as standard,” he said.

Sharing data on the performance of corporate debt restructuring (CDR) mechanism with Business Line, he said “the total references received as at end December was 208 cases aggregating to Rs 90,888 crore. Of these, debts totalling Rs 5,018 crore in 29 cases were either rejected or closed; 173 cases were approved and the combined debt stood at Rs 84,510 crore , while 6 cases were under finalisation of restructuring package.’

Iron and steel topped the industry-wise list of approved cases with the debt totalling Rs 29,991 crore in 21 cases. Textiles topped in the number of cases at 30.

Units in every industry segment such as fertiliser, petrochemical, refinery, sugar, telecom, power and chemicals had sought to restructure their debt.

“Banks are required to restructure substantial number of cases in the current environment as a one-time measure. The time for implementing the restructuring package should therefore be extended to 180 days from 120. This would give the participating banks adequate time to implement a well-thought out restructuring package,” he said.

According to Mr Sitabkhan, banks were unwilling to participate in additional funding programme.

“They agree that for long term viability of the project certain capital expenditures/ enhanced working capital limits would be required and the non-availability of funds or delay in sanctions would render even sound and viable units sick. The Reserve Bank should therefore direct the lenders to contribute proportionately for completion of the project/ working capital needs.”

Industry sources said the provision for diminution in the fair value of the restructured advances (for borrowers up to Rs 1 crore) should be reduced from 5 per cent of the total exposure to 2.50 per cent.

Industry associations feel that the RBI should allow the promoters to make their contribution in a phased manner in the first year of implementation of the restructuring package, instead of insisting on up-front contribution (equivalent to 15 per cent of the lenders sacrifice).

More Stories on : Non-Performing Assets | Restructuring | Accounting Standards | Tamil Nadu

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