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Tuesday, September 29, 2020

With moratorium over, RBI set to announce corporate loan restructuring norms soon

The KV Kamath committee tasked with the recommendations on the parameters is believed to have submitted its report to the RBI.

By: ENS Economic Bureau | Mumbai | Updated: September 6, 2020 8:06:01 am
rbi, Reserve Bank of India, rbi corporate loans, rbi bank moratorium, rbi news 

The Reserve Bank of India (RBI) is likely to announce the financial parameters to be factored in the resolution plans under its proposed loan restructuring scheme to bail out Covid-hit companies on Sunday or Monday.

The KV Kamath committee tasked with the recommendations on the parameters is believed to have submitted its report to the RBI.

The central bank will notify the parameters, along with modifications, before September 7. The committee undertook the validation process for the resolution plans to be implemented under this framework, without going into the commercial aspects, in respect of all accounts with aggregate exposure of Rs 1,500 crore and above at the time of invocation.

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While the six-month moratorium on loan repayments ended on August 31, the RBI has allowed banks to recast loans that were classified as standard as on March 1, 2020. Banks have already started working out the details of recasting retail and small loans.

While a high proportion of the debt from the real estate, airlines, hotels and other consumer discretionary sectors is likely to be restructured, the largest contribution would be from infrastructure, power and construction.

Explained

Largest contribution to be from infra, power, construction

While the six-month moratorium on loan repayments ended on August 31, the RBI has allowed banks to recast loans which were classified as standard as on March 1, 2020. Banks have already started working out the details of recasting retail and small loans. While a high proportion of the debt from the real estate, airlines, hotels and other consumer discretionary sectors is likely to be restructured, the largest contribution would be from infrastructure, power and construction.

The restructuring quantum from the corporate sector in FY21 could range between 3.0 and 5.8 per cent of the banking credit, amounting to Rs 3.3-6.3 lakh crore, India Ratings has said. Even stressed assets that may not slip in the near term could be restructured, as Covid-19 would have aggravated stress, it said.

At least Rs 2,10,000 crore (1.9 per cent of banking credit) of non-corporate loans is likely to undergo restructuring, which would have otherwise slipped into the non-performing asset category, India Ratings said in a report.

Overall, loans worth Rs 8,40,000 crore, or 7.7 per cent of the total bank credit, of corporates and non-corporates, including retail, agri, micro, small and medium enterprises segments, are likely to get restructured under the RBI’s proposed loan restructuring scheme to bring down Covid-related stress.

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