The Reserve Bank of India announced Strategic Debt Restructuring Scheme. The RBI issues guidelines on Joint Lenders’ Forum ( JLF) and Corrective Action Plan (CAP). These measure provides a more flexible process for lenders to recover bad loans.
RBI has made clear that this scheme is meant to be used when a company’s turnaround is being held up by the inefficiency or failure of the existing management.
The guidelines are:
- Banks that wants to remodel their company’s debt under strategic debt restructuring scheme must hold 51% or more of the equity shares issued by the company.
- The Joint Lenders’ Forum ( JLF) must approve the SDR conversion package within 90 days from the date of deciding to undertake SDR
- The conversion price of the equity shall be determined by Market value (for listed companies) and Break-up value.
- Lenders who acquire shares of a listed company under a restructuring will be exempted from making an open offer, as per rules from capital markets regulator Securities and Exchange Board of India (SEBI).
- Equity shares acquired and held by banks under the scheme shall be exempt from the requirement of periodic mark-to-market for the 18 month period.