The Telegraph
Since 1st March, 1999
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Hint of hope for debt-ridden companies

Calcutta, Nov. 1: The corporate debt restructuring cell comprising leading financial institutions and banks is planning to bring down the outstanding debt burden criteria from Rs 20 crore to Rs 10 crore.

At present, companies with a minimum outstanding debt of Rs 20 crore are only eligible for referral to the CDR. To widen the ambit, the forum is keen to reduce the outstanding limit to Rs 10 crore.

J. . Godbole, chairman of the CDR empowered group and executive director of Industrial Development Bank of India, said, “We will start accepting cases worth Rs 15 crore from end -December. And by the end of this fiscal we hope to accept cases involving Rs 10 crore. The CDR cell would like to help corporate India become healthy once again.”

Godbole was speaking at a seminar on corporate debt restructuring organised by the Indian Chamber of Commerce today.

Godbole said that the CDR system seeks to bridge the communication gap between the lenders and creditors. The banks and financial institutions have evolved the process based on the experience of other countries like the United Kingdom and Thailand.

Till date the CDR cell has received 85 proposals with an aggregate debt of Rs 56,414 crore. Out of these 85 proposals, the cell has approved 55 cases involving Rs 46,061 crore. The cell has rejected 20 cases involving Rs 6,913 crore. The cell is currently processing 10 cases involving Rs 3,440 crore. Another 15-20 cases are in the pipeline, Godbole said.

Sectoral CDR approvals had been the highest for steel involving Rs 23,861 crore, followed by petrochemicals at Rs 8,907 crore, power at Rs 2,966 crore and fertilisers at Rs 2,206 crore. The CDR cell had been able to restructure loans worth Rs 1,962 crore for the cement sector, Rs 1,737 crore for the textiles sector and Rs 1,200 crore for the sugar sector.

The cell has also put in place a monitoring mechanism. Officials of the CDR cell meet the corporates once in a month to review the progress of the corporate debt restructuring.

The empowered group of the CDR cell has also urged the foreign banks operating in the country to join the CDR cell.

Godbole said that the inter-creditor agreement (ICA) has been signed by 65 banks out of 109, both in the public and private sector. The CDR cell has also been able to rope in Global Trust Bank and HDFC.

He said that it is expected that the foreign banks would convey their decision by November this year. The only legal basis for the CDR process was provided by the debtor-creditor agreement, he added.

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