The Reserve Bank of India (RBI) had earlier mandated banks and NBFCs to provide 10% extra capital for restructuring of loan accounts impacted by Covid-19.
By Ankur Mishra
Finance Industry Development Council (FIDC), the umbrella body for non-banking financial companies (NBFCs), has written to finance minister Nirmala Sitharaman, seeking a waiver on the additional 10% provisioning requirement for one-time restructuring of loans. The Reserve Bank of India (RBI) had earlier mandated banks and NBFCs to provide 10% extra capital for restructuring of loan accounts impacted by Covid-19. The regulator on August 6 had allowed restructuring of personal and corporate loans with strict barriers.
The letter mentioned that NBFCs follow Indian accounting standard (IND AS) norms on provisioning for credit losses. “These provisions are much higher than RBI norms,” FIDC said. “IndAS norms require provisioning to be done for credit losses on historical average and own experience of respective lenders and therefore, all accounts are adequately provided for,” it added.
The letter further said, “We, therefore, suggest that the additional provisioning requirement may be dropped for restructured accounts for NBFCs.” FIDC also requested finance minister Nirmala Sitharaman for extending one-time restructuring to all standard accounts. Currently, the central bank allows only those accounts to be eligible for restructuring, which do not have dues more than 30 days as on March 1. The NBFC body has requested the finance minister that accounts which have dues till 90 days as on March 1, 2020, to be included for one-time restructuring. An account remains standard till 90 days of a default by borrower, before it is classified as non-performing asset (NPA) by lenders.
Banks and NBFCs had earlier met finance minister Nirmala Sitharaman on September 3 to discuss one-time loan restructuring. Finance minister asked lenders to have board approved restructuring policy for their stressed customers by September 10. Nirmala Sitharaman also asked banks and NBFCs to commence the process of assessing and if needed, restructuring loans of eligible customers by September 15.