Demonetisation: RBI relaxes loan repayment norms

The Reserve Bank of India (RBI) has further relaxed the norms for bad loan classification for small borrowers. 

The latter now get an additional 30 days to repay, over and above the 60 days extended repayment period announced last month. This relief applies to dues payable between November 1 and December 31, in a concession to the effect of demonetisation. Eligible for the additional time are working capital accounts and crop loans, besides term loans for business purposes. 

In all cases, the maximum limit of loan sanctioned must have been less than Rs 1 crore. Normally, loans unpaid for 90 days are treated as non-performing assets. The first category in this is termed substandard asset, and the relaxation is on this. This loan classification relaxation will apply for banks, non-banking finance companies and housing finance companies, primary agriculture cooperatives, state cooperative banks and district central cooperative banks.

RBI had requested that small borrowers needed more time to repay after the cash crunch in the economy, once Rs 500 and Rs 1,000 notes were declared to not be legal tender.

Many of these small accounts were expected to default after demonetisation. The central bank had said earlier that this was a short-term deferment of the classification as substandard. 

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