Home  Inquiry  
Role of Asset Reconstruction Companies (ARCs)
Stressed Accounts: Common Feature
NPA Accounts-Way Forward
Stressed Accounts- Settlement Process
Strategic Debt Restructuring (SDR) Scheme: Overview
CIBIL -Introduction and Importance
Strategic Debt Restructuring (SDR)- Post 2
Distressed Units- Some suggestions to Revive
Non Performing / Stressed Account: Role of Consultants
Stressed Accounts: Challenges in Restructuring/Revival
Stressed Accounts: Role of Promoters' Family
NPA Feature: Excess Non-Productive Investments
CDR Mechanism: Why Failed?
PSBs- Oxygen of Rs. 70 K Crores : Serious Flaw in Banking Structure
Mounting NPAs: What Went Wrong (WWW)?
Mounting NPAs: What Went Wrong (WWW)? Part-2: Development in Banking System
Mounting NPAs: What Went Wrong (WWW)? Part-3: Sudden Growth in Economy
Mounting NPAs: What Went Wrong (WWW)? Part-4: Political Compulsions & Corruption
Mounting NPAs: What Went Wrong (WWW)? Part-5: Overambitions/Greed of Entrepreneurs
Effect of Federal Rate, RBI Actions and Chinese Impact on NPA in India
NPA/Stress : Disease but Not the End
Revival of Stressed Account: Employee Participation
Challenges in Running a NPA unit
Upcoming NPA Scenario: Are Banks going to be Hit Harder again?
NPA: How to Turn Failure into Success
Handling of Defaulting / Stressed Accounts by Lenders: Serious Faults
New Articles



Strategic Debt Restructuring (SDR)- Post 2

Recently I had written about new RBI guidelines about Strategic Debt Restructuring (SDR) Scheme, where in the lending banks are authorised to convert the loan into equity and take management control of the borrowing company. This step can prove to be a milestone for managing the continuously growing NPA. The effect of this step may be tremendous if the banks really exercise this power very judiciously. Post conversion into equity, the bankers can outnumber the board and then also take the signing powers in their control. Even major business decisions can be taken for the good of the company. Although it looks a very good ammunition in the hands of the banks, it would be fruitful only if the banks have good team to manage the Unit. Banks should be open to outsource the agencies who are capable to provide such turnaround services . The professional team can definitely turnaround such distressed unit and later can be sold to new investors. This route is better than any other route of disposal of stressed assets to recover the loan. For professionals , this offers good business opportunity.
In fact, banks should take certain steps to control the borrower at the initial stage only while sanctioning the loans to avoid the non performance of the account which may include :
1 Pledge of full equity with the automatic transfer clause in the event of default.
2 At least one board representative to monitor the company operations.
3 Proportionate release or charge on shares based on the recovery and additional loans.
However above conditions may be relaxed in case of high rated units. More about the SDR scheme soon.
Copyright © 2010 Truue Global Financial Services Pvt. Ltd.