The role of the government

The role of the government is limited to providing a framework of norms for aiding this exercise typically in the form of tax concessions and recapitalization of banks. Most countries across the world follow a ‘mixed approach’ that is a combination of both the centralized and decentralized approaches. The mixed approach involves restructuring of loans of large enterprises in a government supported out-of-court mechanism. Restructuring mechanism in India too has evolved with different instruments being used by banks for rescheduling, renegotiation and rehabilitation for many years.

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