India: New Debt Restructuring Opportunities in India?

It has long proved difficult to deal with financially distressed companies in India. One of the main reasons is the many tools available to the existing management of a company to prevent an external creditor from taking control over the company. On June 8, the Reserve Bank of India (RBI) issued a circular introducing new measures that should provide help to lenders struggling to cope with the mountain of bad debt owed by Indian corporates. The Strategic Debt Restructuring Scheme (SDRS) which the RBI has now introduced allows banks to convert their outstanding loans into a majority equity stake in a defaulting company if the company fails to honour its debt commitments agreed under a restructuring plan. It is expected the SDRS will enhance the bargaining power of banks during debt restructuring negotiations and ensure better compliance among borrowers with their restructuring plans. Read more