RBI moves to wind up CDR system

Nearly ₹1.32 trillion of bad loans are presently undergoing restructuring in the CDR cell

Mumbai: The Reserve Bank of India (RBI) is moving to shut down the corporate debt restructuring (CDR) system, its very first loan recast mechanism, following its latest framework on stressed asset resolution, three people familiar with the matter said. The regulator has directed the CDR cell to transfer all pending cases to respective lead banks to complete the resolution process, the people cited above said on condition of anonymity.

According to the latest available data, the CDR cell has approved restructuring of stressed loans worth ₹4 trillion since its inception in 2001. Of this, ₹84,677 crore worth of loans exited the CDR cell successfully and ₹1.84 trillion exited without success. Nearly ₹1.32 trillion worth of bad loans are presently undergoing restructuring in the cell.

RBI’s decision to wind up the cell comes after it issued a circular on 12 February withdrawing all existing restructuring schemes. This included the CDR scheme, strategic debt restructuring (SDR) scheme and scheme for sustainable structuring of stressed assets (S4A) and 5/25. The central bank has asked all banks to initiate resolution plans as soon as a corporate default happens, and refer it for bankruptcy proceedings in the event of a failure in restructuring.