BENGALURU: Defaulters of loans beware; RBI has introduced new schemes for enforcing banks that suffer at the hands of their customers who delay the repayment of loans they had taken. The Reserve Bank of India on Monday issued new guidelines under the ‘Strategic Debt Restructuring’ scheme, according to yahoo.com.

Let’s discuss the important factors of this scheme:

The Strategic Debt Restructuring Scheme:

The basic concept of the Strategic Debt Restructuring Scheme is to recover the loans given by the banks to companies who do not repay the loan amount on time or evade the process of repayment. There are many companies which take loans from multiple banks for funding various business activities. The ‘Strategic Debt Restructuring’ Scheme helps these banks to take over the operations of such companies, which struggle to repay loans on a regular basis.

The banks can then recover the loan amount by selling the shares in the market, as it already has taken over the management.

Beneficiaries:

Here not only the banks but the companies that have taken the loan from them too are benefitted. Because, once banks convert loan into equity shares, the company need not pay any more interest on the debt that it has taken. The scheme forces company owners to be more responsible while repaying loans. No owner wants to lose managerial control over their company.

So, with the threat of a bank-takeover looming large, it is expected the company will abide by the debt restructuring plan. However, this will help banks remain profitable and enabling them to lend more.

Necessity Of The Scheme:

Failure of the loan repayment even after 90 days time period will make that loan as a bad loan. However bad loans are always a loss for banks, which make money by lending at higher interest rates. As a result, banks have become wary of lending to companies which is a key reason for the lack of investment in the country. If companies do not expand, the economy cannot grow.

So, banks need a system in place through which they can recover their loans and this scheme works well for the banks.

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