R K Bansal, executive director, IDBI Bank and head- corporate debt restructuring (CDR) says the bank hasn’t seen many CDR cases until now.
In an interview to CNBC-TV18, Bansal says he has received 12 cases in H1 while the same time last year he had received atleast 45 such cases.
Furthermore, Bansal says most of the CDR cases have come in the steel, engineering procurement and construction (EPC) and non-infra EPC space.
Below is the verbatim transcript of RK Bansal's interview with Reema Tendulkar and Sumaira Abidi on CNBC-TV18.
Sumaira: Some reports indicate that CDR references have come off a bit in the first half of FY15 versus FY14. Could you give us some numbers as to how many cases were referred to the CDR cell in the first half?
A: If we look at the overall figures during the first half, we have got only 12 cases during this current half year because we have got only two cases in Q1 and then we have got 10 cases in Q2. If we compare this with the corresponding half year last year, last year we have got almost about 45 cases. So the number is certainly much lesser as compared to previous year. Previous full year we have got cases of more than a lakh crore and a number of cases wise it was about 90.
Reema: What was the reason for the lower CDR references in the first half of the fiscal year?
A: I would say there are four-five reasons. One is that in Q1 what has happened is that RBI came out with these guidelines on Joint Lenders’ Forum (JLF) from April 1, which was the new system for the bank and banks took some time to understand this whole concept of JLF, how it will work. That is why in Q1, we have got only two cases.
The second reason was under JLF system because we have this new system called Special Mention Account SMA2, which means any case which is defaulting for more than 60 days has to be reported as SMA2 to RBI. That has made banks more aware of the cases, which are showing signs of stress. So banks are able to take some preventive action or some rectification in those cases and perhaps they are able to avoid the restructuring.
The third reason I would say is most of the cases which we wanted to come for restructuring, I think have already come, so we are not seeing much additions to those, many companies which were having stress, they have already come for restructuring.
Fourth reason is people are hopeful that they will get signs that economy will do well so many companies feel that they can continue for maybe six more months and they need not have restructurings so they don’t need restructuring so they are hoping once economy picks up which is showing signs, they don’t need restructuring.
Sumaira: What kind of cases or sectors have seen incremental restructuring, are banks restructuring more non-infrastructure project loans since they will be able to restructure these loans even post April 1?
A: Maximum restructuring current year also we are seeing in the same sector, which we were seeing last year and most of them fall into three categories. Maximum number wise cases if we see, these are in steel sectors and second is in EPC and third is infra other than EPC also. So these three sectors are showing maximum number of cases, which are coming for restructuring.
Reema: The first half we have seen lower CDR references as you pointed out, what about the second half, will it continue to remain at a lower level?
A: As far as second half is concerned, we already have seen now November end. So two months are over and we have not seen more than 10-12 cases in these two months but yes, your point is with respect to the fact that after March 31, 2015 the regulatory forbearance will not be available for restructuring. So we may see some increase from December onwards because then in that case, case has to be restructured before March to get that benefit. But I don’t see too much increase because as I explained in the earlier question, most of the cases which needed restructuring have already come and people are seeing signs of improvement in the economy.
Source: Moneycontrol
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