In India, while the banks make the provision for diminution in fair value of advances as a result of restructuring and sometimes take a burden of low-yielding preference shares, borrowers fulfil their obligation by bringing only 15% of the bank’s sacrifice and that too in two phases.
Promoters’ sacrifice It was felt that any sacrifice on the part of the lenders due to restructuring should be accompanied with increased stake of the borrower in the business. This becomes important for instilling financial discipline in the borrower as he will be more concerned about preserving the value of his stake in the business.