Finance Minister Nirmala Sitharaman on Thursday told banks to put in place by September 15 loan restructuring schemes to rescue all viable business units affected by the Covid-19 pandemic. She was holding a review meeting with heads of scheduled commercial banks and non-banking financial companies through videoconferencing.
Top bank executives suggested key changes to the Reserve Bank of India’s loan restructuring scheme to accommodate borrowers who faced stress for a longer period of time, besides lowering the provisioning requirements for restructuring housing loans, the chief executive officer of a bank said, requesting anonymity.
Finance ministry officials told bankers the ministry was in touch with the RBI to ensure that the regulator provided assistance to them in the resolution process.
Stressed industries that have defaulted for more than 30 days should also get an opportunity to restructure their loan accounts, according to suggestions by the bank executives. For non-MSME account holders, such restructuring can be sought till December 31, provided that the borrower should not be in default for more than 30 days as of March 1, 2020. Banks have to implement the resolution framework within 180 days of agreeing upon the restructuring proposal.
For MSMEs, the RBI has allowed all the three types of stressed assets to avail of restructuring, provided their total exposure is not more than Rs 25 crore. But for others, including MSMEs with loan of more than Rs 25 crore, the restructuring window will not be available if they fall under the SMA-1 (31-60 days of default) or SMA-2 (61-90 days default) categories.
The RBI requires banks to make a 10 per cent provisioning for restructured accounts. “For housing loan accounts, there was a suggestion that the provisioning requirements can be reduced,” the bank chief executive cited above said.