With improvement in economic activities and expectation of recovery in the next fiscal, Crisil Ratings in its latest report has said that as many as 99 percent of non-MSME companies are unlikely to opt for the Reserve Bank of India's (RBI) one-time debt restructuring (OTDR). The analysis is based on 3,523 non-MSME companies that it rates. The RBI had announced the restructuring scheme in early August as a relief measure for non-MSME corporate borrowers having an aggregate exposure of greater than Rs 25 crore who were impacted due to the COVID-19 pandemic.
According to the report, improving business sentiment on account of increased economic activity over the past couple of months, and expectation of a sharp recovery next fiscal are persuading borrowers to skip OTDR. Another deterrent is the impact on the borrower's long-term credit history – accounts of those opting for OTDR would be classified as restructured advances by lenders, which could impact their ability to raise debt in future.
The report further said for around 44 percent of Crisil-rated corporates, more than three-fourths of their debt comprises short-term working capital facilities. It said so availing of OTDR would have negligible benefits, as the resolution plans under this scheme are focussed on deferring principal repayment of long-term debt. It added that such borrowers, instead of opting for debt recast, may prefer to seek additional working capital financing as announced by the RBI under its COVID-19 regulatory package.
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