Bank to get control companies Who fail to repay


Mumbai: Now, Reserve Bank of India (RBI) allowed other commercial banks to seize control of a company if a debt recast fails, supplant the management, and sell their stake in the defaulting company as soon as possible to recover dues. It is one of the central
bank’s most aggressive steps to rein in wilful defaulters and curb rising bad loans.

This ‘strategic debt restructuring’ (SDR) exercise of converting loan dues to shares will ensure that promoters are more involved in
turning around a company and will help banks reduce bad assets, RBI said. The central bank, under governor Raghuram Rajan, is
taking steps to empower lenders to recover money from defaulters who have burdened the Indian financial system. Rajan has termed wilful defaulters as freeloaders and said such borrowers have continuously eroded the sanctity of a debt contract.

But before seizing control of a defaulting company, lenders will have to find professional management to run the company and see
to it that it is making good on its repayment obligations to banks, the central bank said. The measures will ensure that promoters of companies do not take the banking system for granted, as the owners may end up
losing control, said a State Bank of India official.