Textile, cement firms next in the CDR line

After steel companies, it is the turn of textile and cement firms to recompense banks. The turnaround by textile and cement companies has made lenders to mull a review of their performance to check if they could recover amounts that were written off.

Banks had written-off compounded interest and liquidated damages (penal interest) while approving debt recast of 18 textile and four cement companies under the corporate debt restructuring (CDR) scheme. They have restructured Rs 2,800 crore of debt of textile companies and Rs 2,700 crore debt of cement firms.

Banks have received from steel companies about Rs 500 crore in accelerated repayments and payments of compounded interest and liquidated damages which were written off earlier.

The lenders now want to assess the textile and cement firms to see if they can activate the recompense clause included in the CDR scheme, banking sources said.

The recompense clause provides that banks can ask CDR-assisted companies to pay the amounts written-off if their performance is better than the projections made in the CDR scheme.

Banks will appraise the performance of these companies and check whether they are in a position to pay the amounts that they once owed to the lenders.

"Steel companies have willingly paid the amounts that we had sacrificed," a senior official of Industrial Development Bank of India (IDBI) said.

Steel companies have been major beneficiaries of the CDR scheme. A total of Rs 27,000 crore of debt of 12 steel companies has been restructured.

Banks have restructured a total of Rs 77,000 crore of debt so far under the CDR mechanism. Banks have restructured Rs 8,000 crore of debt of fertiliser sector, Rs 7,000 crore of chemical sector and Rs 2,000 crore of sugar companies.

Of the total of 152 applications, the CDR group has cleared 112 cases. It has fully implemented CDR for 60 companies and has approved debt restructuring of another 20 companies. It takes two months for implementation after a CDR scheme is approved.

The CDR cell has rejected applications for restructuring of debt aggregating about Rs 10,000 crore and decided to go in for foreclosure or take those cases to debt recovery tribunals, the sources said.

Under the CDR mechanism, banks had reduced interest rates to 14 per cent from 18-20 per cent on rupee loans and to 7 per cent from 10-12 per cent on foreign exchange loans.