The Reserve Bank of India said banks that decide to recast a company's debt under the so-called "strategic debt restructuring" (SDR) scheme must hold 51 percent or more of the equity after the debt-for-share conversion.
The measure was part of a set of guidelines announced by the RBI on Monday on the SDR scheme, which provides a more flexible process for lenders to recover bad loans.
Other measures announced on Monday includes allowing lenders to convert debt to equity within 30 days of the review of the company's account.
In addition, lenders who acquire shares of a listed company under a restructuring will be exempted from making an open offer, as per rules from capital markets regulator Securities and Exchange Board of India (SEBI), the RBI said.
These restructuring norms will also apply to all company accounts before Monday, the RBI said.
For more details on the circular, please see here.