On August 6, the RBI had announced a loan restructuring scheme for all types of borrowers – corporate, MSME and personal loan segments.
For non-MSME account holders, such restructuring can be sought till December 31 this year, provided that the borrower should not be in default for more than 30 days as of March 1, 2020. The banks have to implement the resolution framework within 180 days of agreeing upon the restructuring proposal.
For MSMEs, the RBI has allowed all the three types of stressed assets to avail restructuring, provided their total exposure is not more than Rs 25 crore. But for others, including MSMEs with loan of more than Rs 25 crore, restructuring window will not be available if they fall under SMA-1 or SMA-2 categories.
There are three types of stress assets, technically known as Special Mention Accounts, before an account becomes an NPA: SMA-0 are those in which loan repayments have been overdue for a period of up to 30 days, SMA-1 are the ones that have been overdue for a period between 31 and 60 days, while SMA-2 accounts are those with a delay of 61-90 days.
Days before the RBI’s announcement, Sitharaman had assured the corporate world that the government is in talks with the regulator on a loan restructuring scheme.
The RBI had also set up an expert committee headed by veteran banker K.V. Kamath to recommend financial parameters that the banks may have to examine while framing resolution plans for accounts with exposure above Rs 100 crore.
Most state-owned bank executives expect that 5-7 per cent of their loan books will require loan restructuring. Private bankers feel that they will be able to get a better sense of the amount of loan restructuring required by the end of the third quarter.