FM Sitharaman to review implementation of resolution framework for COVID-19 related stress in bank loans today

New Delhi: Union Minister for Finance and Corporate Affairs Nirmala Sitharaman will review with the top management of Scheduled Commercial Banks and NBFCs, the implementation of the resolution framework for COVID-19 related stress in bank loans on Thursday (September 3, 2020).

The review will focus on enabling businesses and households to avail of the revival framework on the basis of viability, necessary steps like finalising bank policies and identifying borrowers, and discussing issues that require addressing for smooth and speedy implementation, Ministry of Finance has said.

The Reserve Bank of India (RBI) had last month permitted one-time restructuring of both corporate and retail loans.

The benefits of restructuring benefit can be availed by those whose account was standard on March 1 and defaults should not be over 30 days.

Banks are in the process of getting a board-approved restructuring framework in line with RBI’s framework and eligibility defined by the central bank in its notification on August 6.

In February, the RBI decided to extend the benefit of one-time restructuring without an asset classification downgrade to standard accounts of GST-registered micro, small and medium enterprises (MSMEs) that were in default as on January 1, 2020, in line with the Budget announcement.

Priority sector lending status has been extended to start-ups, a move that will encourage banks to extend loans to such units.

To help borrowers deal with liquidity crunch during the pandemic, the Reserve Bank had announced a three-month loan moratorium in March, which was later extended by another three months till August 31. Borrowers opting for loan moratorium can defer payment of the interest and principal component of the loan during this period.

However, bankers expressed reservations over further extending the loan moratorium because it is being misused by even those who have the ability to pay.