Banks will be allowed to rework stressed loans under the oversight of an external agency, thereby ensuring transparency while also protecting bankers from undue scrutiny by investigative agencies. Banks will be allowed to convert up to half the loans held by corporate borrowers into equity or equity-like securities, RBI said in a statement. Bad loans across the 40 listed banks in India increased to Rs.5.8 trillion as of the end of March 2016 from Rs.4.38 trillion at the end of December. Once the sustainable level of debt has been determined, banks can convert the rest of the debt into equity or quasi-equity instruments. In June 2015, RBI introduced the strategic debt restructuring scheme, which gave banks the option to convert part of the debt of a company into majority equity.

Source: Mint June 13, 2016 18:33 UTC