On Tuesday, the chiefs of private sector banks met with Reserve Bank of India Governor Shaktikanta Das to pitch for a limited moratorium of payments and a wider window to restructure dues.
Extending Restructuring Window
According to the sources who are the two bankers from the meeting, the private bank chief executives requested that the RBI allow banks to offer a moratorium on payments between April and June.
The move is to ensure that the borrowers who were unable to pay their dues since April are not classified as non-performing assets by June 30, due to the lockdown induced by the second wave.
Further, these loans will most likely be restructured under the extended one-time restructuring scheme.
The banks are most likely to invoke the scheme only in August-September.
With the help of the moratorium, this will allow these borrowers to remain standard, as per the sources.
On May 5, Governor Das reviewed the implementation of relief schemes announced during the meeting.
Urging Banks To Providing Banking Services
Further, he also urged banks to continue providing banking services, including credit facilities to those impacted by the pandemic.
He has also held a similar meeting with public sector bank chiefs on May 19.
Sources mentioned that the private bank CEOs also sought a wider window under the reopened one-time restructuring scheme.
Further, they want the restructuring scheme to be available for large corporate borrowers in contact-intensive sectors such as aviation, hotels and hospitality, as well as restaurants.
Earlier, when the RBI had reopened the one-time restructuring On May 5, it mentioned that the banks can invoke it only for retail, small business borrowers for up to Sept. 30.
Corporate And MSME Borrower Stayed Away From The Restructuring
Basically, this one-time scheme allows banks to restructure dues without downgrading the accounts to the NPA category.
In addition to that this provisioning requirement is also lower at 10% for these accounts.
The banks can offer a moratorium on payments or extension of repayment schedule by up to two years, as a part of the restructuring.
The Private bank’s CEOs ought to extend the two-year period to three years for borrowers which were restructured last year, as per the sources.
Since these restructured borrowers have already lost one year of operations due to the Covid-19 pandemic.
So it won’t be feasible for them to immediately start repayments with just a two-year moratorium under the scheme, sources said.
Earlier, corporate borrowers had stayed away from using the one-time restructuring scheme when it was introduced in August.
So far, only retail borrowers dominated the restructured portfolio.
The corporate borrowers had largely kept away from the scheme as it could impact their ratings, as informed by the State Bank of India Chairman Dinesh Khara.
Not only corporate, but the MSME borrowers, those who had availed additional credit facilities under the government’s Rs 3 lakh crore emergency credit guarantee linked scheme had largely stayed away from restructuring their dues.
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