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The Reserve Bank of India is in consultation with capital market regulator SEBI to prevent loss to banks while restructuring debts of companies. When banks acquire shares of borrower companies by converting the loans into equity following RBI’s guidelines, they also have to conform to SEBI’s regulations on public offerings and takeovers.
In a Monetary Policy Statement, the RBI on Tuesday said, “Very often, the share prices of companies whose debt is being restructured, in accordance with the stipulations of ICDR Regulations are found to be not in consonance with their intrinsic value.” This results in upfront allocation of disproportionate share of loss on restructuring to banks, the statement added.
Banks are also allowed to hold shares in a company, whether as pledgee, mortgagee or absolute owner, up to an amount not exceeding 30 per cent of the paid-up share capital of that company or 30 per cent of its own paid-up share capital and reserves, whichever is less.
In view of the loss to banks in some cases, the RBI is consulting with the SEBI for waiver, under certain specific circumstances, of the requirement of compliance with the ICDR and SAST Regulations, for conversion of debt into equity, the statement added.
Detailed guidelines will be issued within three months, the RBI said.
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