establish that the borrowers are sincere about the project, in particular, that the borrowers, or at least the senior management of the borrowing companies, are willing to tighten their belt and share the burden of restructuring. 37. also, lenders must ascertain the amount of the sacrifice required to be made on their part. restructuring proposals could be considered much more favourably if there is no sacrifice on the part of the lender except postponement of the repayment date of the principal. banks would do well to adopt the money lender principle of greater concern in the interest income in such situations if the borrower is servicing the loan regularly. even where the banks has to make some sacrifice by sanctioning the restructuring proposal, there must be some provision for re - compensation when the borrower / borrowing unit comes out of trouble. of course, there are prudential provisions which have to be built up to protect the lender in case of the failure of the restructured unit. bis central bankers ’ speeches 38. further, our entire approach to restructuring has to be reoriented to show more compassion to the small customers. smes and priority sector advances are an important segment of the economy and viable accounts facing temporary problems in such sectors must not be discriminated against when they request for restructuring. nurturing of viable accounts is in the long term interest of both the lenders and the borrowers. this will not happen automatically. there is a need for a structured mechanism for considering restructuring of retail, sme and agricultural loans just as there is the cdr for considering restructuring proposals for larger accounts. this structure will need to be built in at various levels – at the state, the district, the region and the bank level. the functionaries at various levels will need to be empowered to assess and approve viable restructuring proposals. without such delegation, it would be extremely difficult for the benefits of restructuring to percolate to the smaller accounts. 39. again, for restructuring proposals to be successful in assisting the borrower to tide over temporary difficulties, it is critical that the assessment of the proposal and its approval are completed within a specific time frame, say 90 days. time is very often the very essence in ensuring the turnaround of projects and an elongated process of assessment of the restructuring proposal could itself erode the viability of the project. conclusion 40. before concluding, i would like to emphasise that resources of the banking sector are precious and limited and they cannot be allowed

to be used in an imprudent way. cdr is a necessity especially when economic upturn and downturn are a way of life and part and parcel of business cycles for individual companies. corporate debt restructuring has been in existence for more than a decade in india, and this system has fulfilled its objectives to a large extent. it is a mechanism evolved for preserving the economic values of banks ’ assets should not be used against its noble objectives. similarly, regulatory forbearances are discretionary tools which should be used only in the most demanding times. it goes without saying that its future success and failure will depend upon the ethics and integrity of its members and the professionals involved in the restructuring process. 41. the restructuring process is a tool for assisting distressed sections of the economy to tide over difficulties which are temporary in nature and due to circumstances beyond their control. for us to justify that restructuring is for the larger benefit of the economy and the society, it is imperative that it is available to all classes of borrowers and is made available in a timely and non - discriminate manner. this will be possible only if we develop the necessary structures, systems and processes to adhere to the above objectives. a viable time bound action plan for implementing all of this is critical and i hope the finance professionals will play a major role in doing this. i wish the deliberations in the seminar all success. thank you. bis central bankers ’ speeches