A Study On The Evolution And Effectiveness Of Corporate Debt Restructuring In India

Yashi Shrivastava, Career College, Bhopal

Utkarsh Pandey, Lucknow University

ABSTRACT

Since its inception in 2001, the corporate debt restructuring (CDR) mechanism has exerted a profound influence on the reshaping of syndicated/consortium based loans. It sprouted as a platform for creditor banks and institutions to furnish sustenance to viable companies grappling with financial adversities. The restructuring package could involve various changes, such as business transformations, asset sales, interest rate reductions, deferred repayment schedules, working capital limit swaps, debt-to-equity swaps, waivers and sacrifices, and even new loans for admitted corporations. The number of CDR cases in India increased dramatically in 2013-14 compared to 2009-10, and the annual CDR exposure during this period rose by more than nine times. This abundance of CDR instances raises important questions about its impact. Does it truly expedite the optimal allocation of capital, or is it merely a tool wielded by vested parties, such as promoters and bankers, to manipulate and protract the inescapable bankruptcy of a company? The likelihood of manipulation is further intensified by the fact that until March 2015, the Reserve Bank of India practiced regulatory forbearance for cases where restructured assets were still deemed standard. This article aims to analyse the origin, growth, and effectiveness of the CDR mechanism in India.