There is a need for greater transparency to find out the economic impact and audit of big ticket CDR (corporate debt restructuring) cases, according to RBI.
“With increased regulatory focus on segregating cases of wilful defaults and ensuring adequate equity participation of promoter(s) in the losses leading to defaults, there is a need for greater transparency in carrying out a net economic value impact assessment and audit of big ticket CDR cases,” RBI said in the Financial Stability Report released on Monday.
There is also a need to review and strengthen the accountability mechanism in the entire process of reference, approval and implementation or exit under CDR. Adequate disclosures on the eventual cost-benefit profile of approved CDR cases (for successful as well as failed cases) will help in forming policy and aid proper use of scarce resources.
CDR is a process when banks provide support through restructuring of genuine cases of corporates in financial difficulties because of factors beyond their control. The CDR mechanism is meant to revive such cases as well as for the safety of the money lent by the banks and financial institutions.
Out of the total number of cases referred to/ approved under CDR, 49 per cent have been successfully implemented till date, according to RBI.
As per data by the CDR cell, 75 cases were exited successfully amounting to an aggregate debt of Rs 58,205 crore as on September end.
The cell received over 638 cases with a total debt of Rs 4,46,156 crore since inception. Of this, 121 cases have been rejected before admission or approval amounting to Rs 65,581 crore, while 505 cases worth Rs 3,67,607 crore have been approved.
However, RBI observed that the number of cases referred to the CDR cell has come down in the recent past.
One of the reasons for this reduction could be the Reserve Bank’s move to allow banks to restructure their large credits with aggregate exposure of Rs 100 crore and above outside CDR under the Joint Lenders’ Forum (JLF) constituted under the provisions of the ‘Framework to Revitalise the Distressed Assets in the Economy’ which became effective from April 1, 2014.