The Reserve Bank of India (RBI) tightened the rules for corporate debt recasts on Thursday, seeking to address the risk of restructured loans turning bad as the economy struggles for recovery from its slowest pace of growth in a decade, Mint reported.
Banks should set aside more money to cover restructured loans and the promoters of companies seeking a debt recast have to be made personally liable for compensation for losses incurred by lenders engaged in such an exercise, RBI said.
The guidelines make it difficult for company promoters to exploit the corporate debt restructuring (CDR) mechanism offered by banks. Among other things, the guidelines rule out any kind of corporate guarantee; banks will be required to insist on a personal guarantee of the promoters.
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