The Reserve Bank of India (RBI) yesterday conferred a significant power to banks to acquire control of borrower companies which fail to achieve prescribed milestones as part of their restructuring. Under this arrangement, the Joint Lenders’ Forum (or JLF, formed for the purpose of addressing distressed assets) may “convert the whole or part of the loan and interest outstanding into equity shares of the borrower company, so as to acquire majority shareholding in the company”. In other words, the lenders will collectively acquire legal control of the company as they are able to control the entire board by obtaining majority of equity shares in the company. RBI has also prescribed the mechanism for determining the price of conversion of the loan into equity. Earlier this year, the Securities and Exchange Board of India (SEBI) had also amended its regulations to remove constraints pertaining to issue of shares and also to takeovers so that such conversion of debt could occur smoothly.