RBI issues guidelines to revitalise stressed banking assets

From The Hindu Business Line

The RBI said ‘standard’ asset classification benefit will be available to lenders provided they divest a minimum of 26 per cent (against 51 per cent now) of the shares of the company to the new promoters within the stipulated 18 months and the new promoters take over management control of the company.

Lenders will thus have the option to exit their remaining holdings gradually, as the company turns around. Lenders should grant the new promoters the ‘Right of First Refusal’ for the subsequent divestment of their remaining stake.

While the earlier norms exempted lenders from the requirement of periodic mark-to-market of equity shares acquired and held by banks under strategic debt restructuring, the RBI said they should periodically value and provide for depreciation of these equity shares.

The proportion of lenders, by number, required for approving the corrective action plan (CAP), which entails decision on either rectification, restructuring or recovery of a borrower account, has been reduced to 50 per cent against 60 per cent of creditors by number in the Joint Lenders Forum.

The RBI has put in place an incentive structure relating to asset classification and provisioning for banks to communicate their decision on the agreed CAP in a time-bound manner.

Leave a Reply

Your email address will not be published. Required fields are marked *