The Reserve Bank of India (RBI) is monitoring how Indian banks are using the provisions - including that of strategic debt restructuring - given to them to tackle the issue of bad loans, its Governor, Raghuram Rajan, here on Friday.
Reports claim that India banks burdened by bad assets have resorted to strategic debt restructuring (SDR).
SDR helps convert part of the debt into equity and ensures exit of the existing promoter and bringing in a new strategic investor/promoter. It also allows the debt to be categorised as “standard”, thereby doing away with write-downs and provisioning for 18 months.
“We have spent much of the last few quarters creating a variety of bank powers to deal with stressed assets. SDR is just one of them. Having given those powers, we are now looking at how those powers are (being) implemented,” Rajan added.