The banking system in India is expected to restructure loans worth Rs two trillion of borrowers impacted by the Covid-19 pandemic, State Bank of India chairman Rajnish Kumar said.
This estimate for recast covers corporate, MSME and retail borrowers. As for SBI, the estimates are in the region of Rs 20,000 crore covering all segments. There isn't much demand for restructuring as of now. The scale of recast will remain restricted if economic recovery isn't delayed much, SBI chairman said.
Addressing a banking webinar organised by the Confederation of Indian Industry (CII), Kumar said said very few large corporates with loans above Rs 1,500 crore are likely to be come for restructuring.
A lot of clean up and deleveraging has already happened in the case of large companies, many of whom are reluctant to carry the 'restructuring' tag. Segments impacted the most include aviation, hospitality and shopping malls. The real estate sector has been struggling for four to five years and the pandemic has added to problems, Kumar said.
Reserve Bank of India’s biggest concern is that the restructuring scheme shouldn't be misused. There have been more failures than successful resolutions in the past, Kumar pointed out while dwelling on tight boundary norms set by RBI.
The Reserve Bank-appointed expert committee (the Kamath panel) on resolution framework for Covid-19-related stress outlined the financial parameters to deal with 26 sectors under stress due to the pandemic.
According to the panel's report, Covid-19 impacted retail and wholesale trade, roads, textile, and engineering the hardest. Sectors that were already under stress, such as non-bank financial companies (NBFC), power, steel, real estate etc, were piled up with more misery due to the pandemic.
Referring to economic revival, SBI chief said sound financial system is necessary to support efforts to revive economy and steps are necessary to mitigate risks like non-performing loans.
Infrastructure sector investments will help to put economy on the revival path. The funding infrastructure pipeline (of Rs 110 trillion or $ 1.5 trillion) of five years, can give boost to economy in a big way.
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