FM to banks: Roll out loan restructuring by Sept. 15

Lenders asked to roll out scheme by 15th

To assist borrowers hit by the pandemic, finance minister Nirmala Sitharaman on Thursday asked banks and nonbanking finance companies to roll out loan restructuring schemes for Covid- 19- related stress by September 15. She also asked lenders to identify eligible borrowers, reach out to them and quickly implement resolution plans for the revival of every viable business.

Urging lenders to support distressed borrowers, Ms Sitharaman also reminded them that loan restructuring should not impact the lenders’ assessment of their creditworthiness. The government’s move comes three days after the RBI lifted a moratorium on loan repayments on August 31. The RBI offered the moratorium as the Covid- 19 lockdown shuttered businesses and left millions jobless.

In order to help borrowers hurt by the pandemic, finance minister Nirmala Sitharaman on Thursday asked banks and nonbanking finance companies ( NBFCs) to roll out loan restructuring schemes for Covid- 19- related stress by September 15. She also asked lenders to identify eligible borrowers, reach out to them and quickly implement resolution plans for the revival of every viable business.

While urging lenders to support distressed borrowers, Sitharaman also reminded them that loan restructuring should not impact the lenders’ assessment of their creditworthiness.

The government move comes three days after the Reserve Bank of India ( RBI) lifted a moratorium on loan repayments on August 31. The central bank offered the moratorium as the coronavirus lockdown, effective March 25, shuttered businesses and left millions jobless, pushing India’s economy toward a full- year contraction in more than four decades.

In a video conference with heads of scheduled commercial banks and NBFCs, the finance minister urged lenders to immediately put in place a board- approved policy for resolution. "There should be a quick implementation of a sustained resolution plan by lenders for the

revival of every viable business," she said.

Banks are in the process of getting a restructuring framework in line with the RBI's framework and eligibility defined by the central bank in its notification on August 6. In the meeting, bankers assured the finance minister that they are ready with their resolution policies and have started the process of identifying and reaching out to borrowers and that they will comply with the timelines stipulated by the RBI.

An official statement said Sitharaman advised lenders to ensure that regularly updated FAQs on the resolution framework are uploaded on their websites in Hindi, English and regional languages, and also circulated to their

offices and branches. Besides, the minister also reviewed the schemes announced under Aatmanirbhar Bharat— the Rs 20- lakh crore post-pandemic financial rescue package.

The RBI last month permitted one- time restructuring of both corporate and retail loans without them getting classified as a non- performing asset ( NPA). Restructuring benefit is available for accounts that are standard on March 1, with default of less than 30 days. Besides, K. V. Kamath committee is working on recommendations on financial parameters like debt service coverage ratio, debt- equity ratio post- resolution and interest coverage ratio for recasting corporate loans.