With RBI not on same page, fewer cos may qualify

Mumbai: Even as bankers work out a restructuring plan based on the Kamath Committee recommendations, crucial differences over the start date for financial milestones and creditor pacts prescribed by the regulator and the panel could influence the number of eventual beneficiaries of the proposed loan restructuring.In its notification, the Reserve Bank of India (RBI) has asked banks to ensure compliance to the total outside liabilities (TOL) to the adjusted tangible net worth (ATNW) at the time of implementation itself, almost two years ahead of the FY23 deadline proposed by the Kamath committee.Also, banks cannot escape signing the inter-creditor agreement (ICA) even by doing extra provisions and there will be no restructuring without a signed ICA, according to the RBI notification. By contrast, the committee recommendations allowed lenders to restructure loans even without signing the ICA by a higher provision of 20 per cent upon expiry of 30 days from the invocation of the restructuring.Bankers told ET that these two important differences could lead to some companies not qualifying for restructuring.78097289“If a company already meets the TOL/ATNW criteria at the time of implementing the plan, what is the need for restructuring,” asked a public sector bank executive. “This committee was formed to give us a broad framework for restructuring. By interpreting it in its own way, RBI has defeated its very purpose of functioning,” the executive said.TOL/ATNW is the addition of long-term debt, short term debt, current liabilities and provisions along with deferred tax liability divided by tangible net worth net of the investments and loans in the group and outside entities.Bankers are contemplating to seek a clarification from the central bank on its notification even as they have limited time to complete the whole process. Banks have until December 31 to invoke restructuring and have 180 days after that to implement the plan.Another difference is the treatment of ICA. The committee has allowed lenders that have not signed the ICA to make a higher 20 per cent provision after the expiry of 30 days from invocation and still go ahead for restructuring, but the RBI notification gives no such leeway and has made it mandatory.“Signing of ICA is a mandatory requirement for all lending institutions in all cases involving multiple lending institutions, where the resolution process is invoked, and the requirement of additional provisions if the ICA is not signed within 30 days of invocation does not substitute for the mandatory nature of ICA. Compliance with this regulatory requirement shall be assessed for all lending institutions as part of the supervisory review,” the RBI notification said.

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