Corporate Debt Restructuring (CDR) mechanism has been evolved by the Reserve Bank of India for restructuring debts of viable companies in financial trouble for the benefit of all stakeholders, outside the purview of the Board for Industrial and Financial Reconstruction (BIFR), Debts Recovery Tribunal (DRT) and other legal proceedings, through a coordinated programme by and between borrower and the lending bankers.
It is a voluntary non statutory mechanism based on debtor creditor agreement.
Under the ‘stand still’ clause therein the parties agree not to take recourse to any legal action during the ‘stand still’ period of 90 or 180 days. This is to enable the CDR mechanism to undertake the debt restructuring exercise in the meantime without any outside intervention, judicial or otherwise.
Such exercise includes conversion of the debts of the borrower into equity shares, extension of the moratorium period, sacrifices and concessions from the banker.
The purpose is to enable viable companies tide over financial difficulties with the cooperation and support from the banks and financial institutions. Under the scheme flexibility is granted to the viable borrower companies by all their lenders. Many borrower companies have been allowed extension of time up to the year 2020 to repay their loans.
