Working Of The Scheme:

The working of the scheme is such that when a customer approaches the bank about his/her poor financial conditions, the bank often relaxes many terms and conditions regarding the loan. However, if the client’s/customer’s financial performance fails to improve over a longer period of time, then the banks will proceed to convert the debt into equity shares, which means the banks will own the company.

The transfer of ownership must be completed within 90 days. Also, the transfer of ownership will start only after at least 60% of lenders give their approval. They must also owe at least 75% of the total loans.

RBI Concent:

The RBI has made it very clear that the lenders have to sell their shares as soon as they can recover their loan as the lenders may have little knowledge of running a business, they can take the help of professional management for running the company. While exiting the company, the Joint Lender’s Forum (JLF) needs to transfer the ownership to a new promoter who has no links with the old management of the company.

This means the old owners cannot be part of the company’s management any more.

Read More: Jaitley Pitches For Foreign Investments, Promises Tax Stability

Can't Expect PSU Banks to Fund Debt-Rid Discoms: FM