“This arrangement creates a dangerous precedent in India’s corporate debt landscape—it encourages other defaulting companies to seek similar deals, where they can retain control and value even after significant defaults,” the Congress general secretary said.It raises questions about the effectiveness of India’s insolvency resolution framework and the role of public sector banks in managing distressed assets, Ramesh said.The SBI appears to be aligning itself with the interests of the defaulting borrower (SIIL) rather than prioritising the recovery of public funds, he said.Ramesh stressed that there is a pressing need to ensure that public sector banks maintain strict discipline in their approach to debt resolution and avoid creating moral hazards in the financial system.The unusual nature of this debt restructuring and equity investment calls for immediate regulatory scrutiny, he said.”The Reserve Bank of India (RBI) needs to step in and examine SBI’s decision-making process in this matter,” Ramesh said.
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