Despite exit by small lenders, banks still prefer CDR cell
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Despite exit by small lenders, banks still prefer CDR cell

Last Updated: Sunday, October 28, 2012, 15:16
 
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Despite exit by small lenders, banks still prefer CDR cell
Mumbai: Despite some small private sector banks opting out of the corporate debt restructuring (CDR) cell, experts are of the opinion that most lenders will continue to be part of this forum as a consortium approach gives a lot of comfort over taking an individualistic route.

"The CDR process is bank and customer-specific. If a bank takes a call on an individual customer, there is nothing wrong in that. However, banks draw a lot of comfort from consortium approach and the CDR process is doing fine," Indian Banks Association Chief Executive K Ramakrishnan said.

"Banks still opt for consortium approach for lending and for restructuring. Except some aberrations or exceptional cases, multiple banking approach is very much part of the domestic banking system," he added.

Recently, Yes Bank joined other financial institutions like Kotak Mahindra Bank, Development Credit Bank, IFCI and international lenders like Barclays and HSBC who have remained out of the CDR forum.

As per experts, the decision to stay out of the CDR forum is driven by the fact that the interests of small lenders are not protected in the prevailing CDR mechanism.

"Smaller banks are opting out of the CDR forum as they feel that big lenders are dictating terms and their interest is not protected. But, all banks can take their own view regarding a particular account to protect their interests," Angel Broking Vice-President, research, Vaibhav Agrawal said.

He, however, said the CDR mechanism is going to stay. An official from a public sector bank said though the CDR cell has its own problems, consortium approach remains the best approach for a comprehensive view about a company.

PTI



First Published: Sunday, October 28, 2012, 15:16


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