are expected to start credit operations from April 20, to help a staggered restart of the economic activities. The credit operations were halted as
were working with reduced staff or had channelised its employees to the government's direct benefit transfer schemes.
“The borrowers, which were classified as special mention accounts-2 (SMA-2) turned into NPA worth over Rs 50,000 crore by the end of March for the entire banking system. These were accounts mainly belonging to the micro, small and medium enterprises (MSMEs). We have asked the government to take it up with the RBI,” a chief executive officer of a PSB said, requesting anonymity.
SMA-1 are those in which loan repayments have been overdue for a period between 31 and 60 days, while SMA 2 accounts are the ones with a delay of 61-90 days. If interest or principal amount of the loan is overdue 90 days it is classified as an NPA.
The RBI had allowed a three-month moratorium on all term loans, including agriculture, retail and crop loans, along with credit cards and working capital payments. But the benefit of the moratorium was available for payment falling due during March 1 to May 31.
The lenders had approached the RBI to allow borrowers whose payments were due on or before February 29 to take the benefit of the dispensation given by the regulator since most of these accounts were related to the MSMEs which are already facing stress due to the national lockdown and impact of the Covid-19 on the economy. The RBI had rejected the banks’ demands, as it felt such accounts weren't affected due to Covid-19.
“The NBFCs should also be allowed to take the benefit of the three-month moratorium. But the regulator is keeping mum over the issue. The NBFCs somehow could manage in March but they are feeling the pressure in this month and May would become even more difficult,” the banker said.
On March 27, the RBI had introduced a three-month moratorium on payments for working capital. While interest will be due on those payments, and can be recovered later, the delay won’t be considered a default, the RBI had said. However, banks have argued that the regulatory forbearance was extended for working capital, and for retail customers. Since finance
companies don't have a concept of working capital, the forbearance didn't apply to them, according to bankers.
The bank executive said that the government was depending upon the financial system to help push the economic activities from April 20.
“Banks have been told to arrange sufficient cash, especially in the rural areas which is the focus now,” the executive added. "A proposal to guarantee loans given to the MSMEs by lenders was also discussed in the meeting. “This will certainly take care of our capital needs as the loans will be 100% guaranteed by the government and the accounts will have zero risk weight,” the executive said.