IN WHAT may bring borrowers a huge relief, the government is in active discussion with the Reserve Bank of India to offer a one-time loan restructuring plan to companies for them to survive the adverse impact of Covid-19 pandemic, Finance Minister Nirmala Sitharaman said Thursday. She also stressed on the need for banks to pass on the benefits of repo rate cuts by reducing interest rate aggressively, and indicated that the benefit of emergency credit line guarantee scheme (ECLGS) would be extended to individual borrowers such as truck owners.
“In these pandemic times, it has actually caused a lot of pain and stress. We are talking to Reserve Bank to see if a one-time restructuring can be offered so that everyone comes out a bit more honourably (out) of this (crisis),” she said in a video conference interaction with senior members of Chennai International Centre.
Banks argue that the RBI needs to give operational flexibility to banks for a comprehensive restructuring of the existing loans and also a modification of the 90-day norm for asset classification. As of now, the June 7 circular on loan restructuring is stringent and gives little flexibility to banks, industry sources said.
On the ECLGS scheme run by the National Credit Guarantee Trustee Company Ltd (NCGTC), the government had approved funding of upto Rs 3 lakh crore for the MSME sector. Banks could extend an extra 20 per cent of outstanding loans to their MSME borrowers with a clean credit history.
This scheme currently does not provide any benefit to individuals. A senior member of the Chennai International Centre pointed out to the finance minister that nearly two-third of his borrowers are individuals including truck owners. Responding to these comments, Sitharaman said: “I think we are very close to give that opportunity to include individuals too in this NCGTC scheme.”
The Finance Minister denied that private banks were hesitant in disbursing credit under the scheme to MSMEs and noted that 16 private banks were providing data on disbursements regularly. While public sector banks have disbursed Rs 22,197 crore under the scheme, private sector banks have given Rs 10,697 crore, she said. “Private sector banks will have to definitely buck up a bit more because many of MSMEs are with them,” she said.
She also said her ministry was intensely engaged with the Reserve Bank, along with the banks, to understand why transmission of rate cuts was not happening. “… (it) is not really as it should be because the Reserve Bank of India has shown agility in bringing the rate of interest down and it is not actually getting passed on to customers,” she said. Last month, the RBI had cut repo rate 40 basis points bringing it to an all-time low of 4 per cent. But this hasn’t translated to any relief for borrowers who are still paying over 8 per cent.
“The reasons are obvious from the banks’ side, but that’s not convincing enough for me… if the Reserve Bank has come down, it is also for the banks now to understand where their MCLR (Marginal Cost of funds-based Lending Rate) is fixed and why are they using that as an excuse to tell us that they can’t pass on because they are paying higher interest on some of their fixed deposit portfolio that they have given even earlier. We are working out to make sure that the customers are not denied the benefits of a reducing interest rate. The Reserve Bank is engaged with that and hopefully will come out with some solution, which is a fair solution, quickly,” the minister said.
The finance minister also said that the correction of inverted duty structure under the Goods and Services Tax (GST) regime should happen faster, assuring the industry that discussions on the issue were on in the GST Council meetings. “We are continuously talking in the GST Council about it and we are also making sure that the Council will correct all the inversions so that refunds don’t stand out as a sore thumb and two, inversion itself is unfair. So, we have to make sure that it is corrected and we are working on that. But the pace at which it has to be done has to be faster, I concede that,” she said.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines