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Since 1st March, 1999
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Corporate debt recast scheme gathers pace

Mumbai, April 5: The corporate debt restructuring (CDR) cell has given its final approval to 29 cases totalling Rs 29,069 crore, Industrial Development Bank of India (IDBI) chairman and managing director P. P. Vora said today.

“So far the CDR cell has received 60 cases involving Rs 44,595 crore for restructuring, but final approval has been given to 29 cases while 15 cases aggregating Rs 6,404 crore have been rejected,” Vora said. He was speaking at a session on asset reconstruction companies (ARCs) and CDR and non-performing assets at the CII banking summit here.

Out of the 60 applications, 15 were from textiles, nine from petroleum/chemicals and eight from steel, he said.

Vora said, “Sixteen cases amounting to Rs 9,121 crore are currently being processed.”

The CDR system was set up in 2001 but started functioning only in January 2002. The system comprises 10 financial institutions and 49 banks. The objective of CDR was to preserve viable companies and minimise losses to creditors and other stakeholders, Vora said.

IDBI, ICICI Bank and State Bank of India (SBI) have set up an ARC with a 24.5 per cent stake each. The valuation of assets to be transferred would be done by independent valuers, he said.

Vora said initially the ARC would look at cases where full provisioning has been made so that in case of any recovery the bottom line of the institution would benefit.

Vora added that around Rs 2000 crore of non performing assets (NPAs) have been referred to the ARC in the first round. While the setting up of ARCs is expected to clean up the balance sheet of banks and financial institutions, there is a RBI regulation which stipulates that such gains be only used for cleaning up balance sheets and not be distributed as dividend.

Chandan Bhattacharya, deputy managing director of State Bank said that the net NPA ratio of the bank is expected to come down to 4 per cent this year from 5.5 per cent last year.

He added that the SBI along with its seven associated banks have set a target to bring down the net NPA ratio to less than 2 per cent over the next few years.

“Some associate banks of ours have achieved the distinction of net NPA of less than 1 per cent,” he pointed out.

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