The Reserve Bank of India is planning to restructure the strategic debt restructuring mechanism, suggests a news report. This may include giving more power to lenders while taking haircuts during the resolution process. RBI is expected to allow banks to convert debt into equity to initiate an SDR but without changing the current management. The RBI is also looking to issue guidelines to allow banks a specific haircut in order to resolve a stressed loan. Under SDR rules, a bank can convert debt at a price below the current market value or an average of closing prices during the 10 trading days before the joint lenders’ forum decision. Banks will have18 months from the date the SDR scheme is effective to find a buyer for the company. If they fail to find a new promoter, the asset would be classified an NPA.
