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Reserve Bank of India relaxes promoter norms for restructuring of loans by banks
October 7, 2010:
According to present guidelines on restructuring of sticky loans by banks needs promoters' to bring a minimum of 15% of banks' sacrifice. The additional funds are required to be brought in by the promoters upfront and not be phased over a period of time.
However, in a notification today, Reserve Bank of India has relaxed promoter norms for restructured loans.
i) If banks are convinced that the promoters face genuine difficulty in bringing their share of the sacrifice immediately and need some extension of time to fulfil their commitments, the promoters could be allowed to bring in 50% of their sacrifice, i.e. 50% of 15%, upfront and the balance within a period of one year.
ii) Contribution by the promoter need not necessarily be brought in cash and can be brought in the form of de-rating of equity, conversion of unsecured loan brought by the promoter into equity and interest free loans.
However, RBI has clarified that in case the promoters fail to bring in their balance share of sacrifice within the extended time limit of one year, the asset classification benefits derived by banks will cease to accrue.
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