Debt Restructuring in India:

Corporate Debt Restructuring (CDR) is a mechanism to revive doubtful corporate loans in order to
ensure safety of money lend by the banks and financial institutions through timely support by
restructuring the loans. It is a voluntary non-statutory system based on Debtor-Creditor Agreement
(DCA) and Inter-Creditor Agreement (ICA). CDR mechanism was evolved and detailed guidelines were
issued by Reserve bank of India in consent with government and financial institutions on August 23,
2001 for implementation by financial institutions and banks. These guidelines on CDR were
subsequently reviewed and revised on the basis of recommendations of a High Level Group and current
comprehensive guidelines on CDR as well as non-CDR restructuring were issued in August 2008.
The main objectives under this mechanism are as follows:
mechanism for restructuring of corporate debts of viable entities facing problems, for benefit of all
fected by the certain internal and external
factors -ordinated
restructuring program. The restructuring of a companys outstanding obligations, habitually attained by:
ing concessions in payment and waiving part of interest -serviced
uction in equity capital to make more
capital available for expansion
payment of interest on the debentures etc.
Trend Analysis: The thought to introduce CDR was to help sinking corporates if they fall under viable
category. However, in recent years CDR comes under scanner due to extraordinary rise in the number
and volume of advances being restructured under the scheme.