Finance minister Nirmala Sitharaman on Thursday requested lenders to swiftly put in place a board-approved policy for a one-time restructuring of loans in sync with the central bank’s recent stipulation, identify eligible borrowers, and roll-out decision schemes latest by September 15.
In a virtual meeting with top executives of banks and non-banking financial companies, Sitharaman reviewed their preparedness and stressed that borrowers must be assisted with the expiry of the loan compensation moratorium. but, COVID-19-related distress “needs to not affect the creditors’ evaluation of borrowers’ creditworthiness”, according to a statement through the finance ministry. Efforts should be made to revive every possible business, she stated.
The meeting comes ahead of the predicted announcement of the KV Kamath-led panel’s suggestions on eligibility parameters for the restructuring of loans to soften the blow to each borrower and the lenders dealt by the pandemic.
Earlier this month, the Reserve bank of India (RBI) extended a unique window for creditors to recast stressed retail and corporate loans without classifying them as non-performing, provided that they set apart 10% provisions on such advances. RBI governor Shaktikanta Das has said a decision framework for COVID-19-associated stressed accounts could be finalized by September 6.
In its financial stability file, RBI has forecast that gross non-performing assets (NPAs) may additionally jump from 8.5% at the cease of March 2020 to 12.5%, a 20-year peak, through March 2021. but, the NPA level may also shoot to 14.7% by March 2021 in case of severity of economic stress.
For their part, the lenders said that they’ve already started the system of figuring out and identifying out to eligible borrowers. Punjab National Bank (PNB) handling director SS Mallikarjuna Rao stated the final week stated he expected approximately 5-6% of the lender’s loan-book, or between Rs 36,000 crore and Rs 43,000 crore, getting recast in FY21.
The scope of the so-called Emergency credit score Line Guarantee Scheme (ECLGS) has become currently expanded to include individuals, along with a much wider pool of organizations. Below this, the Centre has pledged full guarantee for up to 20% more, collateral-loose working capital loans. Another credit score guarantee scheme for the subordinate debt of Rs 20,000 crore, supposed for MSMEs, turned into also deliberated on within the meeting.
Further, the minister additionally reviewed the development of two schemes intended to facilitate Rs 75,000-crore liquidity for NBFCs. Under these, the government has approved the partial credit guarantee scheme (PCGS) 2.0 worth Rs 45,000 crore to improve liquidity for low-rated shadow lenders. Under this scheme, bonds/industrial papers of Rs 25,055.5 crore have been approved for the purchase through state-run banks so far, of which Rs 13,318.5 crore (53% of the portfolio) companies such papers which are rated below AA-.
Those schemes for MSMEs and NBFCs had been a part of the Rs 21-lakh-crore package introduced by Sitharaman in might also soften the blow of the pandemic.
