FM Sitharaman to review loan restructuring implementation

Finance minister Nirmala Sitharaman will review the implementation of the resolution framework for pandemic-induced stressed loans with the top management of scheduled commercial banks and non-banking financial companies (NBFCs) on Thursday.
The meeting will focus on ways to enable businesses and households to avail the one-time loan restructuring scheme, announced by the Reserve Bank of India (RBI), on the basis of their viability, according to a finance ministry statement on Sunday.

The agenda will include the steps needed to finalise bank policy, the framework for identifying eligible borrowers and addressing issues that are likely to come in the way of a smooth and speedy implementation of the scheme, it said.

On August 6, the RBI announced a one-time loan restructuring scheme across corporate and retail sectors that would enable loan accounts stressed due to the pandemic to not be classified as non-performing assets by lenders.

RBI Governor, Shaktikanta Das, said the scheme would be provided through a special window under the June 7 stressed asset resolution framework.

Only those accounts which were in default for not more than 30 days as of March 1 would be eligible and would not entail a change in ownership of businesses.

To ensure that the past bad experiences in loan restructuring are not repeated, the central bank appointed a committee headed by KV Kamath to suggest a framework for implementation of the scheme.

The five-member committee, whose report is due on September 6, will also validate the resolution plans for accounts with cumulative debt of Rs 1,500 crore and above.

In cases where the aggregate debt is above Rs 100 crore, lenders will have to obtain an independent credit evaluation for the resolution plan from a recognised credit rating agency.

Restructuring plans may be invoked any time before December 31, by banks and must be implemented within 180 days of invocation. While retaining standard classification on such accounts, banks are required to make 10% provisions for the same.