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.
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