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Some banks recast debt outside CDR framework

Some banks recast debt outside CDR framework
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According to a study by CARE Research, some banks are restructuring the debt of their borrowers through bilateral negotiation without referring the cases to the corporate debt restructuring (CDR) cell.

The study found that out of the Rs 177,333 crore outstanding restructured advances of 10 large banks, only Rs 58,366 crore worth of loans were referred to the CDR cell.

The remaining over 50 per cent loan was under non-CDR category, including small and medium size enterprises (SMEs), the study shows.

The 10 banks studied by CARE Research include State Bank of India (SBI), Punjab National Bank (PNB), Canara Bank and Bank of Baroda.

Some reports indicate that companies want to avoid going to CDR cell as it creates a stigma in the minds of investors and the general public.

Also, when a company goes to CDR, it impacts its standings with bankers and limits the scope for fresh funding. People are aware of this and, hence, are opting for bilateral loan restructuring, industry sources informed a media.

Some industry watchers feel that the loan given to small and medium companies can be restructured quickly through direct negotiation between banks and companies.

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