One-Time Restructuring A Possibility

One-Time Restructuring A Possibility
Jul 2020 , by , in Latest News, News/Views

The Centre and the Reserve Bank of India may go for one-time restructuring rather than another extension in loan moratorium. Detailed deliberations between the government and the RBI are tilting towards one-time restructuring relief for troubled sectors like tourism, hospitality that have seen a wider impact due to the covid-19 induced lockdown.

The government is in talks with the central banks and the relief measures may be announced around the time the deadline for the loan moratorium ends on August 31.

The government had also given a 100% guarantees for collateral-free loans for MSMEs of up to Rs 3 lakh cr out of which Rs 1.20 lakh cr is sanctioned. Under another schemes floated by public sector banks called COVID-19 emergency credit line over Rs40,000 cr of loans had been sanctioned.

“An across-the-board moratorium is not required anymore. However, certain sectors may need some relief and that is where, based on the data available with RBI, there will be a calibrated response,” SBI Chairman Rajnish Kumar said.

Finance Minister Nirmala Sitharaman said on June 26 that intense discussions were underway between the finance ministry and the central bank on providing a one-time restructuring for Covid-19 impacted businesses.

The central bank, however, has warned of high non-performing assets (NPAs), capital erosion due to Covid-19 induced lockdown and advised state-run lenders and private lenders to raise capital.

Banks will aim to raise over Rs 1 lakh cr from the markets as covid-19 buffer and an assessment for capital requirements for PSU banks will be done in the third or fourth quarter. The provisioning requirement will be clear after the phasing out of moratorium and when the sector specific restructuring begins. In the interim, provision requirement may not be high, banks will be able to raise money from the markets. The government will infuse capital in banks once it can assess NPA rise, capital erosion due to pandemic.

                            

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