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Jindals is a company that had been a non-performer for almost a decade who bought Ispat Industries. On the other hand, Kingfisher Airlines has shown few signs of recovery since it bought low-cost carrier Deccan Aviation (Air Deccan) in 2007.

Both of these companies is now in the process of ‘debt restructuring’ wherein it is a method that allows a private or public company or a sovereign entity that face cash flow problems and financial distress to reduce and renegotiate its delinquent debts. Companies are doing this process to improve or restore liquidity and rehabilitate so that business can continue its operations. For small business, what business owners do is to avail quick cash loans such as fast cash advance loans, cash advance payday loans, payday cash advance, payday advance loan and any other forms of short term loans to maintain the flow of business.

Logically, one would have expected the banking regulator, the Reserve Bank of India (RBI), to have intervened in both the cases. But the truth is that the central bank chose to keep its distance from such CDR packages. In fact, it unwittingly encouraged them. RBI only referred us to the various master circulars and guidelines it had issued on CDRs since 2001.

The Reserve Bank of India imposes no limits on the number of Corporate Debt Restructuring (CDR) that can be offered to the same company as long as the business remains viable. As the years passed by, RBI imposes guidelines that would be a big help to some companies under CDR. Furthermore, the bank has extended special CDRs to a business sector or industry as a whole. One example is the Kingfisher’s CDR which was part of an industry package for the aviation sector which was approved by RBI in mid-2010.

When the economic slowed down during 2008-09, the RBI allowed easier CDRs as it feared several companies could go down if their debt burden was not lessened.

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Source : http://www.business-standard.com/taketwo/news/the-curious-casedebt-restructuring/426203/