Finance Minister Nirmala Sitharaman told banks in a meeting on Thursday to put in place a loan restructuring scheme for rescuing all viable business units affected by the Covid-19 pandemic by September 15.
“During her interaction, the Finance Minister focused on lenders immediately putting in place board-approved policy for resolution, identifying eligible borrowers and reaching out to them and quick implementation of a sustained resolution plan by lenders for revival of every viable business,” the finance ministry said in a statement.
The meeting was held with the chief executives of all scheduled commercial banks and non-banking financial companies to “review their state of preparedness for implementation of the loans resolution framework for Covid-19 related stress.”
The FM stressed that banks should keep in mind the Covid-19 related distress of borrowers which should not come in the way of assessing their credit-worthiness at the time of giving loans.
“During the meeting, Sitharaman impressed upon the lenders that as and when moratorium on loan repayments is lifted, borrowers must be given support and Covid-19 related distress must not impact the lenders’ assessment of their creditworthiness,” the finance ministry said.
The banks were told to put in place FAQs (frequently asked questions) on the debt restructuring on their websites in multiple languages.
“The lenders assured that they are ready with their resolution policies, have started the process of identifying and reaching out to eligible borrowers, and that they will comply with the timelines stipulated by the Reserve Bank of India (RBI),” the ministry added.
The finance ministry is also in touch with the RBI to ensure that the regulator provides assistance to lenders in the resolution process.
“The Finance Minister also exhorted the lenders to proactively respond to needs of companies and businesses, as well as those of individual borrowers, and to spearhead the efforts for rebuilding businesses desperate for help owing to Covid-19 related distress,” the finance ministry said.
On August 6, the RBI had announced a loan restructuring scheme for all types of borrowers – corporate, MSME and personal loan segments.
For non-MSME account holders, such restructuring can be sought till December 31 this year, provided that the borrower should not be in default for more than 30 days as of March 1, 2020. The banks have to implement the resolution framework within 180 days of agreeing upon the restructuring proposal.
For MSMEs, the RBI has allowed all the three types of stressed assets to avail restructuring, provided their total exposure is not more than Rs 25 crore. But for others, including MSMEs with loan of more than Rs 25 crore, restructuring window will not be available if they fall under SMA-1 or SMA-2 categories.
There are three types of stress assets, technically known as Special Mention Accounts, before an account becomes an NPA: SMA-0 are those in which loan repayments have been overdue for a period of up to 30 days, SMA-1 are the ones that have been overdue for a period between 31 and 60 days, while SMA-2 accounts are those with a delay of 61-90 days.