Bad loan rejig: RBI says first loss must be borne by promoters

The committee should also consider an option to transfer the promoters' holdings to a security trustee or an escrowarrangement till turnaround of company. “This  will enable a change in management control, should lenders favour it,” the RBI said.

The central bank said if a borrower has undertaken diversification or expansion of activities which has resulted in the stress on the core business of the group then the lenders should stipulate a clause for sale of non-core assets as a condition for restructuring the account.

For restructuring of loans of listed companies, lenders may be compensated for their losses by issuance of equities of the company upfront, subject to regulatory requirements.

According to RBI, the amount of recast loans touched an all-time high of Rs 4 trillion or 10.2 per cent of the overall advances as of September 2013.  It had warned in December that in case the restructured assets were added, the total stressed advances ratio rose to 10.2 per cent in September 2013 from the 9.2 per cent in March 2013.