Are Corporate and Top Management of Banks Preparing to Introduce A New Scheme to Cheat Banks -
Banks May Ease Recompense Clause
By
Rajesh Goyal 
On 12th February, 2013, a small news appeared in ET under the heading "Banks May Ease Recompense Clause for Cos", (Click on the headline to read the full news). It was was an innocuous type of news that most of the bankers must have either missed it or ignored the same as not being of much consequence. A large number of the bankers may not be even aware about "recompense clause".
However, as I read the news item, I smelled something fishy. With my limited knowledge of credit and restructuring, I could still feel that corporate and bankers have started lobbying for a new scheme which will cheat the banks as it can lead to large scale sacrifice of revenue. It can be even worse than what bankers sacrifice while settling NPA accounts, because here the corporate will be still running a profitable business and corporate will be allowed waiving of interest which he has agreed to pay to bring his business out of woods.
Let us first see what does the news item means. It says that top bankers are considering to the recompense clause for companies that become profitable after debt restructuring, Most of the bankers are aware that on number of occasions, corporate approach for restructuring of their loans merely to take benefit in the shape of lower interest rates under such a scheme. However to avoid misuse of this facility of concessions for restructuring, banks over a period of time have learnt their lessons and ask for "recompense clause" when the company becomes profitable and restructuring period is over.
On searching from the net I came across an article under the following heading (link given below) on RBI website which is dated 13th September, 2012, which is actually a keynote address by ED of RBI :-
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