Full Form of CDR:
Corporate Debt Restructuring
CDR Full Form is Corporate Debt Restructuring. CDR is an important aspect in any corporate set-up. It is essentially a non-statutory, voluntary system which is premised on the Inter-Creditor Agreement (abbreviated as ICA), the Debtor-Creditor Agreement (abbreviated as DCA) and the principles relating to approvals by super-majority of about 75 percent of creditors in value that makes it obligatory on the remnant 25 percent to toe the majority’s line. The CDR mechanism includes only consortium/syndication accounts and multiple banking accounts in which all banks and financial institutions altogether have an outstanding aggregate exposure of about Rs. 100 million and beyond.
It includes all categories of assets found in the member-creditors’ books classified under the Reserve Bank of India’s prudential asset categorization standards. CDR is required to help the companies recover from financial imbalances and other related difficulties as it enables restructuring of the corporate mechanism in a more effective and smart manner. CDR mechanism can be initiated by (1) Any or more creditors possessing at least 20 percent share in either term finance or working capital, (2) By the particular corporate, if there is no support from a financial institution or bank possessing at least 20 percent share.
It is to be noted that in no case there can be a request of CDR if the corporate is engaging in fraudulent activities. However, the core group on reviewing the reasons relating to the classification of the borrower as a wilful defaulter may consider the admission of exceptional cases for restructuring post satisfying itself by which the borrower would be placed in a position for the rectification of the wilful default provided that he is given enough opportunity under the CDR mechanism. The role played by CDR mechanism is immense and must be studied in extensive detail to understand it better.