Few takers seen for debt recast 2.0 as demand recovers: Crisil

‘Hospitality, education, textiles firms form bulk of those opting to restructure’

With the recovery 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 rating portfolio had opted for or were contemplating restructuring under the Resolution Framework 2.0, the debt rating agency said in the report released on Thursday.

The findings came from an analysis of about 4,700 firms rated by the agency. “The quick recovery in demand after moderation during the second COVID-19 wave, and sanguinity around economic growth have led corporates to give the restructuring option a miss,” said chief ratings officer Subodh Rai. The more localised and less stringent nature of restrictions during the second wave has meant relatively lower disruption in business activities compared to the first wave. So, the muted response is par for the course, he said.

On May 5, the RBI had announced Resolution Framework 2.0 for borrowers, including individuals, small businesses, and MSMEs with an aggregate exposure of up to ₹25 crore, with some caveats. On June 4, the RBI raised the aggregate debt threshold to ₹50 crore.

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

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

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