Wednesday, September 9, 2015

Discount Rate for Computing Present Value of Future Cash Flows

The interest rate charged to the borrower before restructuring may be used to discount the future cash flows for the purpose of determining the diminution in fair value of loans on restructuring. Where the facilities carry different rates of interest, the weighted average interest rate may be used . This discount rate may be used to discount both the pre-restructuring as well as post-restructuring cash flows.
Based on the RBI Circular dt 2/7/15.

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