FM Nirmala Sitharaman To Meet Heads Of Banks, NBFCs To Review Stress In Bank Loans Today

Apart from assessing the preparedness of banks on the debt recast, Finance Minister will also review the progress of various schemes announced under the Rs 20.97 lakh crore Aatmanirbhar Bharat Abhiya.

Finance Minister Nirmala Sitharaman. (File Photo/ AFP)

New Delhi: In order to review the speedy implementation of resolution framework for stress in bank loans, caused by the unprecedented Covid-19 pandemic, Finance Minister Nirmala Sitharaman will meet top executives of heads of banks and non-banking financial companies (NBFCs) on Thursday. The Reserve Bank of India (RBI), in August, allowed one-time restructuring of both corporate and retail loans without getting classified as a non-performing asset (NPA). The review meet comes ahead of the expected K V Kamath committee's recommendations on financial parameters like debt service coverage ratio, debt-equity ratio post-resolution and interest coverage ratio for recasting corporate loans. “The review will focus on enabling businesses and households to avail of the revival framework on the basis of viability, necessary steps like finalising bank policies and identifying borrowers, and discussing issues that require addressing for smooth and speedy implementation,” the finance ministry said in a statement earlier.

#IndiaFightsCorona:

Union Minister, @nsitharaman to review with scheduled Commercial Banks & NBFCs, implementation of resolution framework for #COVID19 related stress in bank loans Details: https://t.co/QIne7a2d5j@FinMinIndia @nsitharamanoffc @MoHFW_INDIA @drharshvardhan — #IndiaFightsCorona (@COVIDNewsByMIB) August 30, 2020

Currently all banks are in the process of getting a board-approved restructuring framework in line with the RBI's framework and eligibility defined by the central bank in its notification on August 6. Apart from assessing the preparedness of banks on the debt recast, sources close to news agency PTI said that the Finance Minister will also review the progress of various schemes announced under the Rs 20.97 lakh crore Aatmanirbhar Bharat Abhiya. As per reports, the progress of Emergency Credit Line Guarantee Scheme (ECLGS) and Credit Guarantee Scheme for Subordinate Debt, among others will be reviewed in the meeting. The statement released by the Finance Ministry also stated that FM Sitharaman will review the implementation of the resolution framework for COVID-19 related stress in bank loans on Thursday with the top management of scheduled commercial banks and NBFCs. As per the Central Bank, the restructuring benefit can be availed by those whose account was standard on March 1 and defaults should not be over 30 days. The K V Kamath committee resolution plan to be implemented under the framework may include conversion of any interest accrued, or to be accrued, into another credit facility, or granting of moratorium and/or rescheduling of repayments, based on an assessment of income streams of the borrower, up to two years. While the resolution under this framework can be invoked till December 31, 2020, the lending institutions have been encouraged to strive for early invocation in eligible cases, particularly for personal loans. Even the state-owned Punjab National Bank (PNB), had last month, said that it expects to restructure loans worth about Rs 40,000 crore as per the RBI-approved guidelines, scheduled to be out soon. The Reserve Bank, its Financial Stability Report, estimated that the gross non-performing assets (NPAs) may increase from 8.5 per cent at the end of March 2020 to 12.per by March 2021 - highest in 2 decades. The report, however, stated that the NPA level may shoot to 14.7 per cent by March 2021 in case of a severity of economic stress.