The Reserve Bank of India (RBI) is likely to announce the financial parameters of its proposed loan restructuring plan soon. In his interview with CNBC AwaazRBI Governor Shaktikanta Das said banks can extend the loan moratorium by 3, 6, or even 12 months under the one-time restructuring.
To mitigate the difficulties borrowers faced during the coronavirus pandemic, the central bank allowed lenders to grant a moratorium on loans for three months of EMI (monthly equivalent installments), which are due between March 1 and May 31, 2020. Later, the RBI extended it. for three more months until August 31.
Subsequently, the central bank allowed lenders a one-time restructuring of loans without classifying them as delinquent assets to help companies and individuals manage the financial stress caused by the coronavirus pandemic. Only those businesses and individuals whose loan accounts are in arrears for no more than 30 days as of March 1, 2020, are eligible for a one-time restructuring. For corporate borrowers, banks can invoke a resolution plan until December 31, 2020 and implement it until June 30, 2021.
For personal loans, banks have the option to invoke the resolution plan until December 31, 2020 and implement it within 90 days from the invocation date. Accounts that are standard, but are not in arrears for more than 30 days as of March 1, 2020, will be eligible for restructuring.
The RBI established a five-member committee under former ICICI Bank CEO KV Kamath on August 7 to recommend eligibility parameters for stress loan restructuring. The committee will only specify financial parameters such as debt-to-equity and debt coverage, Das said in an interview.
On September 3, the Supreme Court of India passed an interim order saying that accounts not reported as Non-performing Assets (NPA) as of August 31 will not be declared as NPA until further notice.
While discussing whether banks should charge interest on the moratorium period, Attorney General Tushar Mehta told the Supreme Court: “The idea of the moratorium was to defer payment to ease the burden caused by COVID and the lockdown for businesses to they can manage the working capital. The idea was not to waive the interest. The effort is that those who are affected by COVID and face distress get the benefit and those who are in default cannot benefit. “
“The committee of experts will develop specific guidelines for the sector on September 6,” Mehta told the high court.
The Center and the RBI informed the Supreme Court on September 1 that the moratorium period on loan repayments amid the COVID-19 pandemic is “extendable” for two years. Finance Minister Nirmala Sitharaman previously asked bankers to implement loan resolution plans before September 15.
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