Finance Minister Nirmala Sitharaman on Thursday told banks to set up loan restructuring schemes by September 15 to rescue all viable business units affected by the Covid-19 pandemic. She was holding a review meeting with the heads of scheduled commercial banks and non-bank finance companies (NBFCs) via video conference.
Top banking executives suggested key changes to the Reserve Bank of India’s (RBI) loan restructuring scheme to accommodate borrowers who faced stress over a longer period of time, in addition to reducing provisioning requirements for the Restructuring of housing loans, said the CEO of a bank: requesting anonymity.
Finance ministry officials told the bankers that the ministry was in contact with the RBI to ensure that the regulator assisted them in the resolution process.
“During her interaction, the finance minister focused on lenders immediately establishing a board-approved resolution policy, identifying and contacting eligible borrowers, and promptly implementing a sustained resolution plan by of lenders for the reactivation of all viable businesses. ”Said the Ministry of Finance in a statement.
Banks have to approve their own loan restructuring plan, which was allowed by the RBI in August for all types of borrowers: corporate, MSMEs and personal loan segments.
The meeting was held to “review your readiness for the implementation of the Covid-19 stress loan resolution framework.”
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“During the meeting, Sitharaman stressed to lenders that when the moratorium on loan repayments is lifted, borrowers should be supported and the distress related to Covid-19 should not affect the lenders’ assessment of their creditworthiness,” said the ministry.
Stressed industries that have defaulted for more than 30 days should also have the opportunity to restructure their loan accounts, according to suggestions from bank executives. For non-MSME account holders, such restructuring can be requested until December 31, provided the borrower is not in arrears for more than 30 days as of March 1, 2020. Banks must implement the resolution framework within 180 days after the date of agreement on the restructuring proposal.
For MSMEs, the RBI has allowed all three types of stressed assets to benefit from restructuring, provided their total exposure does not exceed Rs 25 million. But for others, including MSMEs with loans of over Rs 25 crore, the restructuring window will not be available if they fall into the SMA-1 (31-60 days of default) or SMA-2 (61-90 days of default) categories. breach). .
The RBI requires banks to make a provision of 10 percent for restructured accounts. “For home loan accounts, it was suggested that provisioning requirements can be lowered,” said the bank’s CEO quoted above.
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