“We have decided to demand deferment of up to six months in term-loan installments with a consequential shift in the repayment period by six months. This will be left to the discretion of bankers. If lenders feel that half of the installment amount can be deferred, as the payment capacity of the borrower has weakened, additional six months can be given. Even full installment sums can be postponed on a case-to-case basis,” said Mehta, who was earlier the managing director (MD) and CEO of Punjab National Bank.
pandemic has affected several industries in India and the impact is visible across all segments as cities head for a lockdown to contain the spread. The sectors that have seen an immediate impact range from travel and tourism to hospitality and retail. India’s import-dependent sectors, such as automobiles and pharmaceuticals, will also take a hit.
The IBA will seek an extension of window for resolving stressed assets from the RBI. According to the RBI’s June circular, banks have to review the stressed accounts within 30 days of default, followed by 180 days for implementing a resolution plan, failing which they have to account for possible losses in their balance sheet. “We will seek an additional six months window, especially in those cases where resolution is possible and got impacted due to the pandemic,” Mehta said. To keep more cash in hand, banks will ask for a flat 1 percentage point reduction in the cash reserve ratio (CRR) from 4 per cent now.
“Corporates are under tremendous liquidity pressure. Mutual funds are under stress as investors are exiting. Firms are desperate to raise money and that can be seen from the price of bonds. Promoters have pledged shares that are under stress. The stress is spread across all sectors and there will be a disruption for six months at least,” the banker, cited above, said.
* Extension of 90 days in classifying loans as NPA: An account to be classified as NPA after 180 days of default; no classification of stressed assets during this period
* Forbearance of 6 months in interest of term loan and working capital loans: Term loans and working capital loans installments to be deferred by 6 months
* Longer resolution period: Additional 180 days for resolution of stressed accounts before bankruptcy proceedings. RBI allows 210 days in total for resolution of stressed assets
* Additional cash in hand: Reduction in cash reserve ratio by 1 percentage point to 3% and deferment of additional money towards capital conservation buffer by 1 year
* Longer window for compliance: Extra time window for regulatory compliance. For instance, reporting of fraud