Decision On Corporate Loan Restructuring Possible
Decision on corporate loan restructuring possible in the next monetary policy review, Finance Minister hinted. A positive decision on corporate loan restructuring is expected during the review meeting of the Reserve Bank’s Monetary Policy Committee next week.
Considering the way Covid-19 has affected the economy of the country, banks as well as lenders are assuming that repayment of loans will not be easy in the coming days. This is constantly being discussed in the Finance Ministry. Now Finance Minister Nirmala Sitharaman herself has indicated that a theoretical consensus has been reached in this regard.
While Rajnish Kumar, chairman of SBI, the country’s largest bank, has said that it needs to say that the RBI is going to announce the decision of its next review meeting on August 6 or next week on Thursday. Finance Minister Nirmala Sitharaman clarified the government’s view in this regard, saying, ‘Right now our focus is on loan restructuring. There is a continuous discussion with RBI on this.
Theoretically, it has been accepted that loan restructuring (other provisions including increasing deferment for repayment and reducing installment amount) is needed. The Finance Minister said this while addressing a meeting of the National Executive of the Industry Chamber FICCI. In this meeting, almost every representative of the industry stated its need.
After getting its approval, it will be the largest corporate loan restructuring in the history of the country, under which companies will be allowed to pay the outstanding debt. Earlier, companies were given such facilities during the 2008 global recession. By the way, care will be taken that companies in the same sector whose benefits have been affected due to Kovid-19.
According to experts, in the meeting with PM Narendra Modi this week, a presentation was given on restructuring of corporate loans from the financial sector. Banks say that given the way Covid-19 has affected industrial business activities, the revenue of the companies seems to be hugely affected.
The RBI has also stated in its report that the level of NPAs (as against total advances) due to the economic slowdown can increase from the current 8.5 percent to 15.2 percent. Its effect can be seen in the entire banking system. But if restructuring allows companies to repay loans afresh, banks can avoid the huge burden of NPAs. That is why banks are demanding it.
SBI Chairman Rajneesh Kumar said on Friday that in a meeting with RBI, all the banks have said that there is no need to increase the moratorium. This period ends on 31 August 2020 and we should stop it here. As far as loan restructuring is concerned, the monetary policy of RBI should be awaited.
