RBI to banks: Convert unsustainable debt of cos to equity

The Reserve Bank of India has proposed a scheme to allow banks throw a helpline to companies that are on the verge of becoming non-performing assets (NPAs) asking them to consider converting unsustainable debt into equity or preference shares with adequate provisioning.

Sources say, RBI has suggested that banks have a look at how much debt the EBITDA of a company can support and slice out the unsustainable part.

Latha Venkatesh of CNBC-TV18 explains; when debt becomes equity, banks become part owners and in this manner the lenders bear some burden by losing on the interest and promoters bear some by losing equity.Watch video for more.