Finance

GoI asks banks to prepare ‘debt recast plans’ for pandemic-hit businesses by September 15

Srinagar: In view of the COVID crisis, the government of India has asked banks all over the country to prepare “debt recast plans” for pandemic-hit businesses by September 15, with the six-month loan moratorium drawing to an end.

The Finance Minister of India Nirmala Sitharaman, in a virtual meeting with banks and non-bank lenders, said that distress caused by the pandemic should not impact lenders’ assessment of borrowers’ creditworthiness.

“During her interaction, the finance minister focused on lenders immediately putting in place board-approved policies for resolution, identifying eligible borrowers and reaching out to them. Quick implementation of a sustained resolution plan by lenders for the revival of every viable business,” a finance ministry statement said.

In March after COVID made its presence in India, the Reserve Bank of India (RBI) permitted a moratorium on the repayment of term loans to provide relief to borrowers for three months.

Later, when the lockdown was extended following a sharp rise in Coronavirus cases, the GoI decided to further extend it by three months.

As banks have already started work on identifying eligible borrowers for the same, RBI also a one-time loan recast without tagging loans as non-performing assets (NPA), before the end of the moratorium.

“Lenders assured they are ready with resolution policies, have started the process of identifying and reaching out to eligible borrowers and that they will comply with the timelines stipulated by RBI,” the finance ministry note added.

Earlier, RBI governor Shaktikanta Das had said that a resolution framework for all COVID related stressed accounts will be finalized by 6 September.

“The finance ministry and RBI are on the same page and have asked banks’ board to quickly approve the resolution plan. Banks will also have a chance to give relief to borrowers from the sectors (tourism, hotels, logistics) that have been hit the most by the pandemic. This will include a sector perspective on the resolution plan, which will help these businesses come back to their feet,” a report by LiveMint quoted  Kuntal Sur, partner at PwC, as having said.

Showing concern on the same regard, instant loan service provider MoneyTap said lenders need to treat different borrower segments differently.

“FM’s appeal and advice are to try and extend restructuring schemes and additional credit to deserving borrowers, such that they have the chance to revive cash flows while maintaining a good credit track record,” the report quoted MoneyTap co-founder Kunal Varma saying.

 

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