With the loan moratorium benefit coming to an end on 31 August, banks have asked the Reserve Bank of India (RBI) to allow them a one-time restructuring of loans the borrowers availed while noting that this can be on a case-to-case basis. When a loan is restructured — the revision of the original repayment schedule — banks need to set aside capital, known as the provision in banking parlance.
Banks have been told to be ready with the list of borrowers who will be eligible for one-time debt restructuring under a special window opened by the Reserve Bank of India (RBI).
There has been uncertainty over the one-time loan restructuring scheme being fully accessible, given that the committee under veteran KV Kamath will start functioning after a few days and will have another 30 days to submit its recommendations before the RBI notifies the norms. Apart from veteran banker Kamath, other members of the committee will be former State Bank of India managing director Diwakar Gupta, who would join effective September 1, after the completion of his term as vice-president, Asian Development Bank; T N Manoharan, effective August 14 after completing his term as chairman, Canara Bank; banking expert Ashvin Parekh; and Sunil Mehta, chief executive officer of the Indian Banks’ Association (IBA) as the member-secretary. The committee has been assigned to working out the broad parameters for loan restructuring and examine if the process is being followed or not, without getting into specifics of the case.
The scheme has been formulated in consultation with the banks and the issues have been widely discussed by the RBI and lenders in detail. Besides, the regulator has made it clear that banks will have a list of cases where the default was under 30 days after the six-month standstill ends on August 31.
In addition, they will also have the track record of the borrower, which will help them prepare a list of possible beneficiaries, and they can decide the eligibility norms and start implementing it once the final guidelines are out. Banking sources also said that banks have four months up to December to finalize and resolve the issues and then up to six months to implement them.
The RBI has made it quite clear that it does not want an open-ended scheme to avoid a repeat of the 2008-09 situation. Bankers and a section within the government are widely keen that the loan restructuring package should be rolled out faster to help several crucial services sector industries – such as tourism, hospitality, and civil aviation – regain some momentum.
