‘Things should be back on track in two years’
The two-year period for the debt restructuring of firms hit by Covid-19 is reasonable, as things will be back to normal in this time frame, says K V KAMATH, chairman of the Reserve Bank of India’s (RBI’S) expert committee on a one-time loan recast. In an interview to Abhijit Lele, Kamath said challenges faced by non-banking financial companies (NBFCS) should be dealt separately by the regulator. Edited excerpts:
The panel held interactions with representatives of various industry segments impacted by the pandemic. What is the extent of pain?
Economic growth in the first quarter was negative. The pain experienced by the system is also consistent with that. So, there are no surprises. Pain is reflected in the loss of sales and the drop in profits.
What is your assessment of the kind of support required in the form of restructuring?
There is a significant amount of investment that should not have problems, going forward, and should do well. This covers the entire agriculture space, fast-moving consumer goods (FMCG), renewable energy, and anything that is consumer-facing such as pharma. Then there are sectors that have seen pain, such as power, real estate, and construction. The rest of the sectors are largely in the middle category, which will need some handholding.
The economy is expected to bounce back and things are expected to recover faster than what we previously thought. The outline of the scheme (for debt recast) that the RBI has put in will be very useful for getting companies back on track. Within the moratorium period of two years, we should see a large part of them coming back to normal with the handholding that banks could provide.
Going by the estimates, more small- and medium-sized enterprises will need recast support. Large units may need less since much work has happened after the asset quality review (AQR). What’s your take?
There is a separate package for the MSME sector. MSMES depend on large companies as part of supply chains. Without large companies, which are going to be the market for MSMES, being in good health, they (MSMES) will have a problem. That is linkage. We are talking of companies above the MSME threshold. With that, the entire spectrum of companies is being addressed.
WHAT THE GOVERNMENT HAS DONE THROUGH VARIOUS SCHEMES IS TO ADDRESS THE PAIN AT THE LOWEST LINK – INDIVIDUALS AND COMPANIES