The loan account monitoring will have to be more vigilant in monitoring a loan account while corporate will have to think twice before restructuring the loan with the Reserve Bank of India. The Reserve Bank of India is now planning the tightening the debt restructuring norms.
A working group of the RBI on restructuring of the loans suggested that the RBI should do away with regulatory forbearance for the restructured assets and the banks should also refrain from converting the debts in to equity. It also suggested that the bank should seek higher sacrifice from the corporate and insists on the promoters guarantee even if the restructuring is on account of the external factors.
The Deputy governor of RBI, Anand Sinha said that the central bank could even do sway with the regulatory forbearance regarding assets classification, provisioning and capital adequacy on the restructuring of loan and advances in line with the norms which are internationally followed. this would even clearly mean that that banks will have to classify an asset as substandard and make provisions on it the moment it is restructured.
However the working group has said that the measure of doing away with the regulatory forbearance could be implemented after a period of two years.