As the economic activities improve and recovery expectation in the fiscal becomes stronger, almost 99 percent of non-MSME companies are unlikely to opt for the RBI’s one-time debt restructuring, said the Rating agency Crisil. This is despite the fact that two-thirds of the rated entities are eligible for restructuring based on the parameters proposed by the KV Kamath committee, Crisil added.

The finding is based on a preliminary analysis of 3,523 non-MSME companies. In August, the RBI had allowed one-time restructuring loans and for non-MSME corporate borrowers having an aggregate exposure of greater than Rs.25 crore and were affected by COVID-19 related issues. Subodh Rai, Senior Director, Crisil Ratings, said that improving business sentiment on account of increased economic activity over the past couple of months, and expectation of a sharp recovery next fiscal is encouraging borrowers to skip one-time debt restructuring. He further added, “Another deterrent is the impact on the borrower’s long-term credit history — accounts of those opting for debt restructuring would be classified as restructured advances by lenders, which could impact their ability to raise debt in future”.

Sameer further added, “The recently announced Emergency Credit Line Guarantee Scheme for the health care sector and 26 other stressed sectors, which allows companies to borrow up to 20 percent of their outstanding dues, will further dissuade borrowers – especially those facing temporary liquidity issues – from opting for debt recast”. But the companies that belong to highly impacted sectors such as hotels, retail, real estate and textiles would still prefer OTDR given their longer business-recovery timelines.

Crisil report also said that more clarity will emerge closer to the regulatory deadline of December 31, 2020, set by the RBI for invoking debt restricting plans.