The 31st August deadline for loan moratorium is unlikely to get extended as veteran banker KV Kamath-led panel is all set to come out with the modalities of restructuring of loans for both corporates and individuals.
The 31st August deadline for loan moratorium is unlikely to get extended as veteran banker KV Kamath-led panel is all set to come out with the modalities of restructuring of loans for both corporates and individuals. The regulator and the banks are now awaiting the new modalities and the Reserve Bank of India may not extend the moratorium period for loans, The Indian Express reported citing government and industry sources. In fact, banks are likely to put in place board-approval policies to deal with individual stressed loans. Suggestions are afloat that the current proposal of allowing restructuring for loans that are overdue for up to 30 days should be increased to those that are overdue for at least 60 days.
“RBI will look into suggestions on allowing restructuring for loans that are overdue till at least 60 days, as against the present proposal of 30 days,” the official added, stating that it is unlikely that the outer limit of repayment terms for corporate as well as individual loans will be extended.
Bankers are also of the opinion that moratorium should not continue once the permission for restructuring of the loans has been secured. “While the moratorium does not permit banks to tinker with the tenure and leads to a rise in EMI after the end of the moratorium period, the restructuring will allow banks to extend the term of the loan by up to two years, thereby bringing the monthly EMI component down for the borrowers,” said a senior official with a bank, the newspaper reported.
The central bank had announced a skeletal scheme for restructuring of loans for companies and individuals whose loan accounts are in default for not more than 30 days as on 1st March, 2020, and said that they are eligible for one-time restructuring. For corporate borrowers, banks can invoke a resolution plan till 31st December, 2020 and the same can get implemented by 30th June, 2021. However, there are companies which were about to revive their operations and income streams but were hit by the pandemic. Sectors including textiles, auto ancillary business, jewellery segment were already in distress in January and a 30-day overdue rules will leave many companies out of ambit, an official of a state-owned bank said.