Finance minister Nirmala Sitharaman asked banks and non-banking financial companies (NBFCs) to have their stressed loan resolution schemes rolled out by September 15.
Sitharaman stressed upon the bankers that borrowers must be given support when the loan moratorium was lifted and their assessment of creditworthiness should not be impacted by the pandemic-induced stress.
The exchange took place during a meeting the minister had with the top management of banks and NBFCs on Thursday to review their state of preparedness for implementation of the stressed loan resolution framework.
On August 6, the Reserve Bank of India (RBI) had announced a one-time loan restructuring scheme across corporate, micro, small and medium enterprises and retail sectors that would enable loan accounts facing pandemic-induced stress to not be classified as non-performing assets by lenders.
“During her interaction, the Finance Minister focused on – Lenders immediately putting in place Board-approved policy for resolution, identifying eligible borrowers and reaching out to them,” said a finance ministry statement.
Sitharaman also advised the lenders to conduct sustained awareness campaigns and to provide regular updates on the resolution framework through their websites and at the branch level.
The finance ministry has also been in touch with the RBI to ensure that the lenders are assisted by the central bank during the resolution process, the statement said.
“The Finance Minister also exhorted the lenders to proactively respond to needs of companies and businesses, as well as those of individual borrowers, and to spearhead the efforts for rebuilding businesses desperate for help owing to COVID-19 related distress,” it said.
The RBI said only those accounts which were in default for not more than 30 days as of March 1 would be eligible for the scheme. It also set up a five-member committee chaired by KV Kamath to suggest a framework for implementation of the scheme, whose report is expected by Sunday.
“Some banks are contemplating increasing the interest rate for restructured loans proportionately to recover the costs involved in the entire process,”’ said Jyoti Prakash Gadia, managing director, Resurgent India, referring to the RBI-mandated 10% provisioning banks must set aside for restructured loans.