FM, SC give breather to borrowers
NEW DELHI: Finance minister Nirmala Sitharaman and the Supreme Court separately offered a much-needed breather to bank borrowers on Thursday, stepping in to prevent loans under stress from impairing their creditworthiness, two days after the lapse of a moratorium on loan repayments necessitated by the coronavirus pandemic.
The top court passed an interim order that loan accounts that hadn’t been declared nonperforming as of August 31 shall not be classified as such until further notice. And at a review meeting to assess banks’ preparedness to implement a loan resolution framework in the aftermath of Covid-19, Sitharaman urged the lenders to support both corporate and individual borrowers who may be under stress, the finance ministry said in a statement.
Sitharaman asked banks to roll out loan resolution plans by September, the ministry added. “During her interaction, the finance minister focused on lenders immediately putting in place board-approved policy for resolution, identifying eligible borrowers and reaching out to them.” “The lenders assured {Sitharaman} that they are ready with their resolution policies, have started the process of identifying and reaching out to eligible borrowers, and that they will comply with the timelines stipulated by the Reserve Bank of India,” the ministry said.
This meeting via video conferencing took place ahead of recommendations by a panel headed by former ICICI Bank chief KV Kamath on the eligibility parameters for restructuring of loans hit by the Covid-19 crisis. In August, RBI governor Shaktikanta Das said a resolution framework for all covid related stressed accounts will be finalised by September 6.
Restructuring some loans will support economic recovery and help borrowers tide over the crisis. India’s economic growth contracted by a record 23.9% in the three months ended June as companies put investments on hold and households pared spending during the 68-day complete lockdown that was in place starting on March 25.