Debt Restructuring Scheme
In today’s economic state, funds have been very difficult. Companies and individuals alike are oftentimes buried in debts. This is because money is not anymore enough to suffice to all the needs of everyone. The fact is that, if individuals are having a tough time, multinational companies are also facing the same situation.
If a company is not doing very well with its finances, it is OK for it to be given a year to recover and do better. But if the chance given goes beyond this prescribed period, then it shows something is wrong. This is what is happening to the Ispat Industries and the Kingfisher Airlines.
Before Ispat was sold to the Jindal Steel, it was no longer performing for about ten years already. However, it was given two doses of corporate debt restructuring (CDR) by its lenders. They also waited seven years before they decided on the change of its management. Kingfisher Airlines, on the other hand, was just given the approval for a CDR with its newest terms. Furthermore, the CDR terms included a part conversion of its debt into equity and lower interest rates.
These two cases have been the subject of scrutiny of many other companies. These, they believe, are not proper. But the Reserve Bank of India (RBI) only distanced itself from the CDR packages. In fact, it even encouraged the lenders. RBI simple referred the inquirers to their master circulars and guidelines on CDRs in 2001. It has been known that RBI does not set limits to the number of CDRs given to a company. It is the discretion of the lenders.
According to the guidelines, RBI will only help in providing guidelines and will not be a member of the CDR Standing Forum.
This issue is yet to be discussed by the Reserve Bank of India and the inquirers. But it is hoped that everything will be settled in due time.
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Source : http://au.finance.yahoo.com/news/Labor-run-away-carbon-tax-abc-3281696062.html?x=0
