The number of cases admitted to the corporate debt restructuring (CDR) cell by banks declined to 24 cases worth Rs 19,650 crore during October-December 2012 compared to 41 cases worth Rs 20,528 crore in the preceding quarter.
Industry insiders attribute the decline in CDR cases to the improving economic outlook. Some industry sources feel that companies and banks are hopeful that the borrowing cost would soften as inflation is showing some signs of easing.
According to a top executive of a leading bank, there are very few fresh references for CDR. The cases discussed in the latest meeting of the CDR cell was largely a review of packages of existing companies and re-entry of select companies where the paperwork was not completed in the given time-frame, the executive is quoted as saying in a media.
Between 2006 and 2010, companies borrowed beyond their capacity either for aggressive bidding for infrastructure projects or for large-size acquisitions. When the interest burden became too heavy and repayment became difficult, they turned to banks for help.
Rating agency ICRA said in a recent report that the pace of downgrades had slowed after a sharp increase in 2011-12. An improving economic outlook and moderation in inflation could alleviate pressure on the credit profiles of companies, the report said.
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