Finance Ministry asks IBA to set up independent body to oversee CDR mechanism
The Indian Banks’ Association (IBA) has been asked by the Finance Ministry to set up an independent body to oversee the Corporate Debt Restructuring (CDR) mechanism.
The step has taken after witnessing a surge in the number of debt restructurings over the past two years. Both the IBA and the finance ministry has expressed concern that banks and their clients are taking undue advantage of the CDR mechanism, deferring the issue of Non-Performing Assets’ (NPA) formation. Under CDR, there were 106 cases of restructured loans, of Rs 76,470 crore, in 2012-13. This was a rise from 50 cases (exposure of Rs 39,600 crore) the previous year.
The Independent Body:
- The independent oversight mechanism will not have any government representative or any serving banker but some experts who will scrutinize from the correctness point of view whether the case referred is genuine.
- The committee will act as an advisory body which will help the banks examine a particular case and it will not be mandatory for a bank to go to the committee.
- The finance ministry has been asking banks to deal strictly with wilful defaulters and to become more aggressive on loan recovery.
- The Reserve Bank of India has also made the debt recast norm tougher. It has said all loans to be restructured after April 1, 2015, should be classified as NPA.
Month: Current Affairs - June, 2013