PSBS to follow templated approach for recast 2.0
Announce standardised products to make funds available for health infra
Public sector banks (PSBS), including the country’s largest lender State Bank of India (SBI), have formulated a “templated approach” for restructuring the retail and small business loans up to ~25 crore under the Reserve Bank of India’s (RBI’S) Resolution Framework 2.0.
They have come out with standardised products to make funds available to businesses for improving healthcare infrastructure, and to individuals for meeting their Covid treatment expenditure.
Business loans have been divided into three categories: For loans under ~10 lakh, PSBS will follow a standard restructuring plan; for loans above ~10 lakh and up to ~10 crore, a graded approach will be followed; and for amounts above ~10 crore, they will put in place a common outreach programme and follow a graded approach for restructuring. There will be standard application and assessment formats, and a standard as well as simplified documentation process.
Individual customers can access their bank’s portal or manually submit their applications to its branches, after which the application will be processed and the resolution plan will be invoked within 30 days. And, after its invocation, the plan will be implemented within 90 days.
As far as small-ticket business loans are concerned, data of eligible units has been extracted by banks and bulk SMSS have been sent to these customers, including already-restructured accounts. Offer-cum-acceptance letters, along with applications, have been generated centrally by banks.
SBI Chairman Dinesh Kumar Khara, addressing a press conference along with Indian Banks’ Association (IBA) Chairman Rajkiran Rai G, said, “Various steps have been taken to ensure that the implementation of Resolution Framework 2.0 announced by the RBI
should be in place by all PSBS. We have all come out with a templated approach for restructuring loans given to individual borrowers, small businesses, and MSMES.” “The idea behind this is, those who are involved in the implementation process should not face any hardship,” Khara said. “We have tried to use as many channels as possible to reach out to customers so that we are in a position to mitigate their hardships.”
Rajkiran Rai said customers of PSBS did not differentiate between banks, especially small borrowers. Having different schemes for restructuring confuses people, so we thought a templated approach for small borrowers would be easy, he said. “It is too early to say how many will take up the restructuring scheme,” Rai said. “Last time we saw that the number of customers who opted for restructuring was not that high,” he said.
Under the first restructuring scheme announced by the RBI last year, around 850,000 small and medium enterprises were eligible but only 60,000 of them availed of the facility.
With regard to moratorium, Sunil Mehta, IBA CEO, said, “Right now, restructuring will take care of the requirement of 80 per cent of the borrowers. Depending on the severity of the second wave, the RBI may come out with additional measures.”
On May 5 this year, the RBI announced the second restructuring package, wherein borrowers (individuals, small businesses and MSMES) having aggregate exposure of up to ~25 crore and those who had not availed of restructuring under any of the earlier frameworks, and who were classified as ‘standard’ as on March 31, 2021, would be eligible to be considered under the framework.
Apart from streamlining the restructuring process, PSBS have come out with three products under which fresh lending will be provided to vaccine manufacturers, hospitals, pathology labs, and manufacturers and suppliers of oxygen and ventilators. Under the emergency credit line guarantee scheme (ECLGS 4.0), hospitals and healthcare facilities will get loans up to ~2 crore to set up oxygen plants, along with power back-up. The interest rate on such loans will be 7.5 per cent and the tenor of the loan will be for a maximum of 5 years.
Business loans for healthcare facilities to expand or set up health infrastructure is the second product where the target group will get funding of ~10-100 crore, depending on the geography, with a tenor of 10 years. The interest rate charged by banks for such loans will vary based on the cost of funds of each bank. Also, PSBS will provide unsecured Covid loans to individuals for treatment. An individual can avail of up to ~5 lakh for a maximum period of 5 years. SBI will charge an interest rate of 8.5 per cent for such loans.
Fresh lending under “Covid loans” will get the priority sector tag, and hence banks are offering loans at concessional rates.