Tired of doling out interest waivers to companies in distress, banks are sending less

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of their debt for corporate debt restructuring (CDR), a process by which banks come together to restructure bad debts through a common scheme.

The amount of debt banks have pushed to the CDR scheme of the Reserve Bank of India has gone down by Rs 6,929.33 crore in the third quarter ended December 31, 2011, to Rs 16,141.49 crore. Bharati Shipyard with a debt of Rs 5,649.74 crore had the largest debt under the scheme during the October-December quarter.

In the second quarter, GTL and two subsidiary companies brought in Rs 16,802 crore of debt for restructuring, which raised the total to an abnormally high level, at around Rs 23,071 crore.

“Big cases where multiple lenders are involved are generally pushed into the CDR. The non-performing assets (NPAs) of the banking system is going up, but lenders may not want to bring a case to the CDR as there are sacrifices to be made and it is a time consuming process,” said a senior official at Bank of Baroda.

Total debt that has come into the CDR cell in the first three quarters of the financial year ended December 31, 2011 stood at Rs 44,885.87 crore while it was Rs 25054.32 crore in the whole of the financial year ended March 2011.

Shrinking export orders and elongated payment cycles are putting small and medium enterprises (SME) and mid-level companies in textile, steel and infrastructure sectors into distress. “Even in the case of Bharati Shipyard, it is the cancellation of orders from European markets that has put the company in trouble,” said an SBI official.

Bad debts of the banking system are expected to go up to 5 per cent of total bank advances by March 2012. Total bank credit is expected to touch Rs 5,00,000 crore.

“Now debt recovery tribunals have become very active with officers posted at every zonal and regional offices, which provides banks with more than one avenue to get back loans. In CDR, there are always sacrifices to be made. So only the best of companies are considered under the scheme,” the SBI official said.