Group 9 PG IB

Corporate Debt Restructuring (CDR)

RBI set up CDR system in 2001 to help the corporates facing financial difficulties due to factors beyond their control and due to certain internal reasons. Besides helping the corporates manage their huge debts, it also seeks to safeguard the interest of banks and financial institutions through restructuring of certain debt cases. High interest costs, along with overall sluggishness in the domestic and global economies have made it difficult for the companies to meet their debt obligations. Cases are brought to the CDR, an informal Reserve Bank of India-approved forum of bankers, to negotiate relaxed repayment terms with struggling borrowers. In the last fiscal a record number of 87 cases (aggregate debt of about INR 68,000 crore -> above US$12 billion) were referred for CDR. Debt restructuring through the Corporate Debt Restructuring Cell (CDR) in fiscal year 2012 was the highest since the forum was launched in 2001. Indian banks refer a case to CDR only when the loan is part of a consortium or syndication. Loans can be restructured outside of CDR as well, as was the case with Air Indias $4 billion loan in late in 2011. CRISIL expects loan restructuring in India to rise to $37.5 billion, or 3.5 of total loans, by March 2013, with large corporate exposures forming the major chunk. The preliminary data suggests that the sharp increase in CDR cases has continued persistently in the current fiscal, as nearly 36 cases involving nearly INR 20,000 crore were referred to CDR cell in the first quarter ended June 30, 2012. As per the CDR data, a total of 50 cases involving an aggregate debt amount of INR 40,000 crore were approved during the last fiscal. In comparison, a total of 27 cases with INR 7,000 crore were approved for CDR exercise in 2010-11. During the fiscal ended March 31, 2010, a total of 31 CDR cases were approved for debt of INR 18,000 crore. Experts say that rising number of CDR cases does not augur well for the banking sectors, as also for the corporates. The aggregate amount of debt referred for CDR -- since this system began in 2001 -- crossed INR 2 trillion in 2011-12, when it reached INR 2,06,493 crore.

Iron and steel sector account for the largest share of total restructured debt
Industry-wise CDR Iron and steel sector Infrastructure Textiles Telecom Approved 6% 6% 8% Fertilizers

Rs 20,817 41 Rs 35,161 59 292 Rs 1,50,515 crore

43%

26% 11%

Rejected

Under Finalization

Number of approved cases

Total 392 cases referred for corporate debt restructuring.

Abhishek Kumar (02) Nikesh Desai (23) Rittvik Agarwal (32) Rohan Rishi (33) Rohit Kumbhar (34) Vinayak Naik (56)