RBI May Allow One-Time Loan Recast In Real Estate
The Reserve Bank of India (RBI) may provide one-time restructuring of loans sectors such as tourism, hospitality and real estate that have been seeking this relief to tide over the business slump resulting from effects of COVID-19 pandemic induced economic downturn.
According to the RBI’s systemic risk survey, the top three sectors identified as adversely affected by the COVID-19 pandemic are: Tourism and hospitality, construction and real estate and aviation. Their prospects of recovery in the next six months appear bleak, the RBI says.
India Inc has been pushing for extension of the moratorium further or a one-time loan restructuring plan, which would allow borrowers to renegotiate loan terms to extend the repayment cycle and cut loan rates. The RBI had last week warned against a spike in NPAs to 14.7 per cent of advances in a worst case scenario in the current fiscal.
Though bankers are not in favour of continuing the moratorium, they are not sure about the need for an across-the-board loan restructuring scheme which was misused by corporates in the past. Corporates had misused loan restructuring till about six years back. Bad loans were hidden under the carpet using loan recast schemes and helpful banks evergreened these loans by sanctioning fresh loans. The RBI will have to ensure that this doesn’t happen again.
However, financiers agree that restructuring of genuine cases of non-performing loans is the need of the hour, as it will allow the system to declog and start functioning. Citing cases where just a Rs 50-100 crore additional funding may revive the project and the loan, the housing finance companies (HFCs), non-banking financial companies (NBFCs) and banks and not able to provide that additional funding as that too will get added to the non-performing asset (NPA) of that particular company,
The RBI needs to allow restructuring of non-performing loans and then the banks and financial institutions can analyse the cases and pick the ones that are feasible to revive. But until the RBI allows it, it is not possible to clean up, according to the experts.