RBI on Monday allowed banks to take control of debt-laden companies by converting loans into equity, if a debt restructuring fails to revive them within a stipulated timeframe.
Capital markets regulator Sebi has already relaxed the norms for banks to take over the ownership of such companies under a new Strategic Debt Restructuring regime.
“With a view to ensuring more stake of promoters in reviving stressed accounts and provide banks with enhanced capabilities to initiate change of ownership in accounts which fail to achieve the projected viability milestones, banks may, at their discretion, undertake a ‘Strategic Debt Restructuring (SDR)’ by converting loan dues to equity shares…,” RBI said in a notification.
It has been observed that in many cases of restructuring of accounts, borrower companies are not able to come out of stress due to operational or managerial inefficiencies despite substantial sacrifices made by the lending banks, it said.
In such cases, change of ownership will be a preferred option, it said, adding, the Joint Lenders’ Forum (JLF) should actively consider such change in ownership.
