Corporate leaders on Tuesday said the Reserve Bank of India’s (RBI’s) move to bar all corporate debt-recast programmes and send them to the National Company Law Tribunal (NCLT) after a six-month window is “disruptive” and will impede industrial revival. “The RBI should first tell us how many of their previous plans, such as S4A, CDR, 5:25 schemes, etc, have worked? If these schemes were a failure, then the RBI should first acknowledge it. Now, what is the guarantee this scheme will help banks or corporate entities?” said a chief executive of a large infrastructure firm, asking not to be named. “This move is disruptive and will certainly bring down credit growth of banks to the corporate sector, as no company will start a new project,” he added. Late on Monday evening, the RBI scrapped all existing norms and said companies will get six months from March 1 to get their house in order or go for bankruptcy. “If a scheme is not agreed upon and implemented already, then SDR (strategic debt restructuring) will no longer continue, as all schemes will be dismantled with immediate effect by the RBI,” said a corporate lawyer. This is likely to impact the debt-recast plans of infrastructure, power, telecom, and road companies, he added. This comes at a time when industrial production moderated to 7.1 per cent on a year-on-year basis in December last year, despite a favourable base effect. The moderation was due to lower growth in manufacturing, infrastructure, and consumer goods. The chairman of a large company said the RBI move would make sure that stalled projects in the power and infrastructure sectors would remain stalled.
Source: Business Standard