RBI unlikely to extend Dec 31 loan rejig deadline – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-unlikely-to-extend-dec-31-loan-rejig-deadline/articleshow/79934588.cmsSynopsis

The governor on Wednesday concluded a two-day meeting with public sector and private sector banks, held through video conference. Days before banks closed their books for the third quarter, Das asked them to make enough provisions should loans go bad. He also asked banks to raise more capital to grow loans.

(This story originally appeared inon Dec 24, 2020)Mumbai: The December 31 deadline for banks to accept restructuring requests from Covid-hit businesses is unlikely to be extended. This was indicated by RBI governor Shaktikanta Das in his meeting with bankers.

The governor on Wednesday concluded a two-day meeting with public sector and private sector banks, held through video conference. Days before banks closed their books for the third quarter, Das asked them to make enough provisions should loans go bad. He also asked banks to raise more capital to grow loans.

In his meeting, the governor asked bank chiefs to remain vigilant and to take proactive measures to strengthen their resilience and lending capacity. He also sought an update from banks on the progress in the implementation of a resolution framework for Covid-related stressed assets.

According to banks, in addition to Future Group and Shapoorji Pallonji, a few power projects have also sought restructuring. They said the total number of requests for a recast of loans over Rs 1,500 crore, which needs to be vetted by the K V Kamath-led panel, could go up to 12. Total corporate slippages is expected to be Rs 2.5-3 lakh crore for the current fiscal.

Some banks have made the case for extending the last date for submitting restructuring applications by individual borrowers to March 31. According to them, many individuals are not feeling the need to restructure their personal loans because there has been a moratorium, which was followed by a standstill against loans being classified as a non-performing asset (NPA) because of a Supreme Court order. The feeling is that they will realise their need for restructuring only once banks start initiating recovery proceedings.

Because of the standstill on NPA classification following the Supreme Court order, the second half of FY21 saw banks report bad loans at a lower level than pre-Covid levels. Last quarter, the RBI had asked banks to still disclose the value of loans that would have been NPA but for the court order. It has now asked banks to make adequate provisions for all these loans.

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