RBI to bring debt recast plan by Sep 6, says governor
BANKS CAN EXTEND LOAN RELIEF BY THREE, SIX OR 12 MONTHS UNDER THE SCHEME
MUMBAI: Reserve Bank of India (RBI) governor Shaktikanta Das on Friday said the central bank will come out with a resolution framework for all Covid-related stressed accounts by September 6. In an interview to CNBC Awaaz, Das said banks can extend the moratorium by three, six or 12 months under the onetime restructuring scheme.
RBI has allowed banks to restructure certain loans to support economic recovery and help hard-pressed individuals and companies to tide over the ongoing crisis. With production still to recover to pre-covid levels due to lack of demand and job losses, bad loans are expected to surge to a 20-year high after RBI’S loan moratorium ends on August 31.
RBI had set up a five-member panel under the chairmanship of former ICICI Bank chief executive KV Kamath on August 7 to recommend eligibility parameters for restructuring stressed loans. In his interview, Das said the committee will only specify financial parameters such as debt-equity and debt coverage ratios. Under the guidelines, RBI had said that the lending institutions may allow extension of residual tenure of loans, with or without payment moratorium, by not more than two years.
Mint had reported on August 21 that lenders were preparing guidelines ahead of the moratorium deadline to determine eligibility and ensure borrowers do not misuse the one-time loan restructuring package for stressed individuals and companies once repayment moratorium ends in a little over a week. Many lenders have set up internal groups to vet debt recast applications, and plan to divide them into two buckets—customised and standardised—for quick resolution of proposals.
Das said the committee’s recommendations will be only for business loans, while retail loans will be resolved right away. Those assets which were under stress even before the Covid outbreak must be resolved, according to guidelines issued in the June 7 circular. “We have considered both business and retail borrowers. Moratorium was a temporary solution for the lockdown period. Resolution is a permanent solution,” he added.
Commenting on the economic environment, Das said RBI had projected a forward guidance on GDP growth to be in the negative territory in 2020-21. “At the monetary policy committee meeting, all members were of the view that RBI is constrained in cutting lending rates due to persisting inflation. It would be prudent at this stage to wait for a firmer assessment of the outlook for growth and inflation as the staggered opening of the economy progresses, supply bottlenecks ease and price reporting pattern stabilises,” Das had said.