The Hindu Business Line : Debt revamp system for medium sector enterprises

THE Reserve Bank of India has released the report of the Special Group on debt restructuring for medium enterprises on the lines of Corporate Debt Restructuring (CDR) for comments.

The group was constituted to formulate a mechanism and to suggest appropriate operational guidelines for debt restructuring for medium enterprises on the lines of CDR, said a RBI release.

The report said that the new debt restructuring mechanism for medium enterprises, termed as Medium Sector Restructuring (MSR) System, will have two-tier structure with MSR Standing Forum at the national level and MSR Empowered Group at the state level. Corporates in the SME sector will be extended the system initially.

The system will be implemented by commercial banks, financial institutions, state financial corporations (SFCs) and urban co-operative banks and will cover all multiple banking accounts or syndication or consortium i.e. more than one lender with outstanding exposure of Rs 5 crore or more but less than Rs 20 crore.

Banks and financial institutions will have to disclose in their annual balance sheets, under `Note on Accounts', the requisite information on total amount restructured (both standard and sub-standard assets) under MSR system, stated the report.

Necessary guidelines by banks or financial institutions may be issued on debt restructuring, as approved by their respective boards, for single lender as well as more than one lender borrowal accounts for outstanding amount below Rs 5 crore.

The report said that under the restructuring package of MSR system, the existing or new lenders might take additional exposures. Such additional exposures may be exempted from provisioning requirements for certain specified period. SIDBI may consider extending refinance to SFCs providing concession/relief to units restructured under MSR system.

The Debtor-Creditor Agreement and the Inter-Creditor Agreement will provide the legal basis for the MSR mechanism.

A `stand still' clause, binding for 90 days by both sides, which can be extended to 180 days in respect of genuine cases of delay, would be one of the most important elements of Debtor-Creditor Agreement, said the report.

Though asset classification norms under MSR system will be identical to the existing CDR system for large corporates, certain concessions in provisioning norms for the sacrifice component have been recommended by the report.

More Stories on : RBI & Other Central Banks | Restructuring

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
`Farm credit outgo much below target in W. Bengal'

BoR raises Rs 70 cr via pvt placement

Pension: Cabinet okays new regulatory framework proposal

From the left pocket to the right

Workshop on cash management

Debt revamp system for medium sector enterprises

IFC to extend $22 m loan to Kotak Bank

Kotak Bank to use Reuters' solution

Syndicate Bank to finance tractors

NPAs rising in retail loan segment