Loan Restructuring: RBI Authorizes Reshaping Personal, Personal and Small Business Loans | India Business News
MUMBAI: Reserve Bank of India Relief was extended to individuals and small businesses on Wednesday who have loans of up to Rs 25 crore by allowing them to seek a loan restructuring if they are affected by the second wave of Covid-19.
Announcing a series of measures to ensure financial stability, the central bank also loosened its purse strings to finance the war on the pandemic by providing a liquidity window of Rs 50,000 crore to strengthen the health care infrastructure. This was supplemented with incentives for lenders who build a Covid-19 loan portfolio.
“This is the first part of a calibrated and comprehensive strategy against the pandemic,” said RBI governor Shaktikanta Das said and made it clear that he was prepared to take many other “small and big steps”, including unconventional ones, and to work with the Center to “improve the extreme hardships” citizens were facing “in this hour of distress “. The loan overhaul will be available to individuals – including home and other personal loans – and small and medium-sized businesses that did not restructure their loans in 2020 and were classified as standard accounts until March 2021.
The RBI has also made it possible for lenders to provide relief to small borrowers and individuals, who took advantage of the restructuring option last year. Under the Rs 50,000 crore program, banks can lend to those involved in the war on Covid, including vaccine manufacturers, importers or suppliers of priority vaccines and medical devices, hospitals and clinics, pathology laboratories, manufacturers and suppliers of oxygen and ventilators, importers of vaccines and drugs related to Covid, logistics companies and also patients to be treated.
Banks, Das said, are being encouraged to provide loans quickly under the program by extending the priority sector classification to these loans until March 31, 2022. These loans, he added, will continue. to be classified in the priority sector until reimbursement or maturity, whichever comes first.
Bankers said that unlike last year, this year there is no overall relief for borrowers on repayment and they will have to seek approval from lenders. Lenders can prevent small loans from deteriorating by doing a custom restructuring and giving them an extra two years to pay off. This relief will cover 85-90% of all bank borrowers in India.
The governor also continued his efforts to contain interest rates by announcing on May 20 Rs 35,000 crore in government bonds as part of his plan to acquire government securities. The announcement brought bond yields down to below 6% and boosted bank stocks early in trading.
According to SBI Chairman Dinesh Khara, the impact of the second wave was different from last year when there was a full foreclosure that disrupted cash flow. While acknowledging that the current quarter would be difficult, the impact on corporate balance sheets would only be known if the situation persisted and companies could currently manage without relief.