Borrowing money


Reserve Bank of India’s (RBI) three-month extension of the moratorium on outstanding loans will help alleviate borrower cash flow disruptions despite lack of one-time debt overhaul relief, Rajnish said Kumar, president of the State Bank. of India (SBI).

Kumar’s statement came shortly after RBI Governor Shaktikanta Das announced a 40 basis point (bp) repo rate cut and extended several regulatory measures in the wake of the pandemic. The moratorium is being extended from June 1 to August 31, due to the extended lockdown and continued disruption, Das said. The previous moratorium ends on May 31. Get cash loans here.

“Our tendency has become that whatever has been given, you just have to take it and ignore it, then start talking about what hasn’t been done,” Kumar said when asked if the RBI was ignoring lenders’ demand for a one-time debt overhaul. The Association of Indian Banks (IBA), of which Kumar is chairman, had called for one-time debt restructuring relief.

The moratorium itself will take care of the disruption in cash flow, now that there is time until August 31, Kumar said.

“When we talk about ad hoc restructuring, it requires more analysis. The overhaul is necessary for any business if it has suffered losses, and then we need to develop a plan to finance those losses, “Kumar said. If borrowers have cash flow problems even after August 31, banks will have to deal with the situation, he said.

“I wouldn’t be obsessed with a one-off overhaul at this point where we still have time until August 31st. This will depend on how the various sectors of the economy react after the lockdown is gradually lifted. We will have to assess the need and if there is a need for one-off restructuring, we can always do it within the framework of the circular of June 7, ”said Kumar.

The RBI’s June 7, 2019 Circular on Stressed Assets allows banks to overhaul their debt within six months of the review period, he said. The circular also allows borrowers to be referred to bankruptcy court for resolution.

According to the circular, a 30-day review period begins after a borrower defaults. However, the government recently said there would be no new insolvency cases for a year now, a move that bankers say would disrupt collections.

“Even now, if we know that a large unit will not be able to pay off long term debt or the losses are such that an overhaul needs to be done, an overhaul can be done today,” a- he declared.

The loan recasting proposal sent by IBA had two parts. For the loans below ₹1,500 crore, the debt restructuring will be done on a case-by-case basis, under the direction of the lead bank. However, for the above loans ₹1,500 crore, restructuring proposals will be made based on RBI’s June 7 Circular on Resolving Stressed Assets. Right now, all debt rebuilds are demoted to the non-performing asset (NPA) category and banks have asked RBI to relax that test for now.

On Friday, the RBI also allowed the repayment of accrued interest in installments until March 2021.

Kumar said interest on the working capital loans will be recoverable in installments from September.

To subscribe to Mint newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.