Crisil: Few Corporates Taking to Debt Restructuring Under Framework 2.0

By BW CFO World Online Bureau

Under the RBI Resolution Framework 2.0, few corporates have opted to or are looking for debt restructuring because of the bounce back in demand and growing confidence in economic growth

With the bounce back in demand and growing confidence in economic growth, very few corporates have opted for or are looking for debt restructuring under the RBI’s Resolution Framework 2.0, according to a report by Crisil Ratings.

Barely 1% of eligible companies in Crisil’s ratings’ pool had opted for or were thinking of restructuring under the Resolution Framework 2.0.

The result had been obtained from a pool of 4700 companies. “The quick recovery in demand during the second COVID-19 wave, and buoyancy around economic growth have led corporates to give the restructuring option a decline,” said chief ratings officer Subodh Rai. The more localised and less strict nature of restrictions during the second wave has meant relatively lower disturbance in business activities compared to the first wave.

On May 5, the RBI had announced Resolution Framework 2.0 for borrowers, including individuals, small businesses, and Micro, Small and Medium Enterprises (MSMEs) with a combined exposure of up to ₹25 crores. On June 4, the RBI raised the aggregate debt gateway to ₹50 crores.

About 95% of firms that had opted for or were considering the scheme now, were rated in the sub-investment grade rating category.

Crisil’s director Nitin Kansal said most of these firms belong to the low-to-medium pliability sectors such as hospitality, educational services, textiles, construction and gems and jewellery.

(PTI)