The Reserve Bank of India (RBI) released a discussion paper on Tuesday for early recognition of financial stress
and steps for debt collection. It
proposed leveraged buyouts for specialised entities for acquisition of "stressed companies" and said sector-specific companies and private equity firms may be allowed to play an active role in stressed assets market.
The development comes amidst fear of bad loans hitting a record high of around Rs 2.9 trillion by the end of the fiscal or 4.5 per cent of the total banking assets. RBI Governor Raghuram Rajan had earlier expressed his resolve to correct imbalances in the system.
RBI also proposed improvement in current debt restructuring process and more expensive future borrowings for borrowers who do not cooperate with lenders in resolution.
Banks, particularly state-run lenders, are reeling under deteriorating asset quality and falling profits, prompting the central bank to take steps to improve debt recovery and early detection of stress.
RBI has invited comments on the paper till January 1, 2014.
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