Bank of baroda

Corporate Debt Restructuring (“CDR”)
To put in place an institutional mechanism for the restructuring of corporate debt, RBI has devised a corporate debt
restructuring system. The objective of this framework is to ensure a timely and transparent mechanism for the restructuring
of corporate debts of viable entities facing problems, outside the purview of the Board for Industrial and Financial
Reconstruction, debt recovery tribunals and other legal proceedings. In particular, the framework aims to preserve viable
corporates that are affected by certain internal and external factors and minimize the losses to the creditors and other
stakeholders through an orderly and co-ordinated restructuring program. The corporate debt restructuring system is a
non-statutory mechanism and a voluntary system based on debtor-creditor and inter-creditor agreements. Any lender
having a minimum 20% exposure in term loan or working capital may make a reference to the CDR Forum.
The system put in place by RBI contemplates a three tier structure with the CDR Standing Forum at the helm, which is
the general body of all member institutions, out of which is carved out the core group, a niche body of select institutions
that decides policy matters. Decisions on restructuring are taken by the CDR Empowered Group, which has all the
member banks/FIs as its members. To assist the CDR Forum in secretarial matters and for analysis of the restructuring
packages, a CDR Cell has been formed.
The total membership of the CDR Forum as on March 31, 2004 was 60, of which there were 14 FIs, 27 public sector
banks and 19 private sector banks.
RBI has by its circular DBOD BP.BC.No. 45-21.04.132-2005-06 dated November 10, 2005 amended the above guidelines
on CDR and the major amendments include the following:
extension of the scheme to entities with outstanding exposure of Rs. 100 million or more;
requirement of support of 60% of creditors by number in addition to the support of 75% of creditors by value with
a view to make the decision making more equitable;
discretion to the core group in dealing with wilful defaulters in certain cases other than cases involving faruds or
diversion of funds with malafide intentions;
linking the restoration of asset classification prevailing on the date of reference to the CDR cell to implementation
of the CDR package within four months from the date of approval of the package;

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BANK OF BARODA
restricting the regulatory concession in asset classification and provisioning to the first restructuring where the
package also has to meet norms relating too turn-around period and minimum sacrifice and funds infusion by
promoters;
convergence in the methodology for computation of economic sacrifice among banks and FIs;
limiting RBI’s role to providing broad guidelines for CDR mechanism;
enhancing disclosures in the balance sheet for providing greater transparency;
pro-rata sharing of additional finance requirement by both term lenders and working capital lenders;
allowing OTS as a part of the CDR mechanism to make the exit option more flexible; and
regulatory treatment of non-SLR instruments acquired while funding interest or in lieu of outstanding principal and
valuation of such instruments.