RBI will tweak strategic debt restructuring norms after getting feedback from banks

MUMBAI: Reserve Bank of India ( RBI) will tweak the so called strategic debt restructuring ( SDR) rules on the basis on feedback from banks taking into account their experience in dealing with errant borrowers in the last six months, deputy governor R Gandhi said.

SDR allows banks to convert their loans into equity giving them more control in recovering bad loans by fastening the sale of assets.

Banks so far have converted loans of four companies from the steel and power sectors into equity as they deal with stressed loans amounting to more than 10 per cent of total banking assets.

Gandhi also said that the central bank will continue to approve new types of non banking finance companies.

"RBI is actively studying the peer-to-peer lending arrangements that are slowly gaining traction.... based on a detail study we intend to bring out a discussion paper for public consultation," Gandhi said adding that risks for such new kind of lending also will have to be taken into account.

Earlier this year the RBI gave small banking licenses for ten micro finance companies.

Gandhi said as these NBFCs convert themselves into banks it opens space for other micro finance institutions to grow and also as it will free up capital for the micro finance sector.