The central bank’s debt resolution plan for corporate and personal loans has been welcomed by analysts, bankers and corporates.

Under the facility, lenders can go for a one-time restructuring of loans under stress due to the pandemic.

The move will help soften the impact on both banks as well as borrowers on the twin dimensions of controlling a rise in NPAs and supporting credit flow, said Krishnan Sitaraman, senior director, Crisil.

“The relaxations permitted, subject to certain conditions being fulfilled, will limit the rise in NPAs in the banking system in the near to medium term,” he said.

Mr. Sitaraman said the restructuring option had been extended to retail personal loans as well since many of these borrowers had faced challenges in debt servicing due to salary cuts and job losses. “MSMEs, who have been substantially impacted by disruptions , also get a relief in the form of a three-month extension in the existing restructuring scheme,” he added.

“The industry is encouraged by RBI’s decision to provide a window under the Prudential Framework to enable lenders to implement a resolution plan,” said Uday Kotak, president, CII.

“It is to be hoped that the expert committee led by K. V. Kamath will come out with norms that will enable banks to judiciously monitor businesses while enforcing timely payments as per the restructuring plan. Sectors that are highly stressed due to the impact of COVID are in dire need of such restructuring,” he added.

“Extension of timeline of MSME restructuring, incentive scheme for priority sector lending shall work favourably towards the stability of financial sector to support growth and recovery in the economy,” said A.K. Das, MD and CEO, Bank of India.

“Provision of resolution framework for the COVID-19-related stressed assets is another welcome move,” Mr. Das added.

“According priority sector lending status for start-ups and allowing debt restructuring for stressed MSME borrowers would help cushion the severe impact of the slowdown on this segment, which has been the worst affected,” said Arun Singh, global chief economist, Dun and Bradstreet.