CDR was instituted by Reserve Bank of India (RBI), National Central bank of India in August 2001 as a voluntary mechanism to reorganize outstanding debt obligations.
The reorganization of the debt can be made by the following ways:
Increasing the tenure of the loan
Reducing the rate of interest
One time settlement
Conversion of debt into equity
Converting un-serviced portion of interest into term loan
It has been a successful instrument allowing corporates to return to profitability for benefit of all stakeholders involved.