The Reserve Bank of India reopened a one-time debt restructuring scheme as the economy braces for the impact of a renewed surge in Covid-19 cases.
The one-time restructuring scheme will be available for borrowers with aggregate outstanding dues of up to Rs 25 crore and whose accounts are classified as standard as of March 31, 2021, according to RBI Governor Shaktikanta Das. Borrowers who have received relief under previous restructuring schemes, including that announced last year, however, would not be eligible to avail this scheme.
The scheme would have to be invoked by Sept. 30 and implemented within 90 days of invocation, Das said during a media briefing on Wednesday.
The restructuring scheme allows lenders to restructure retail and micro, small and medium enterprises loans, without attracting a non-performing loan tag. Lenders can offer a moratorium of up to two years on repayments under this scheme.
In case of individual borrowers who had availed loan restructuring under the August 2020 circular, the RBI said lenders may use this window to extend their repayment moratorium to two years, if the approved scheme had called for a lower tenure.
Further, the banking regulator allowed lenders to review the working capital limits for small businesses that had restructured their dues in 2020 as a one-time measure.
The banking regulator will allow banks to utilise their floating provisions or countercyclical provisions held as of Dec. 31, 2020, to make specific loan loss provisions till March 31, 2022.
Last week, BloombergQuint had reported that the RBI had started the groundwork for extension of the restructuring scheme for borrowers.
Covid-19 Loan Book
The RBI also said banks are being incentivised to create a Covid-19 loan book, where they will be able to provide funding to borrowers, including vaccine manufacturers, importers of vaccines and medical devices, hospitals and dispensaries, pathology labs, manufacturers of oxygen cylinders, logistics firms and patients under treatment. These loans will receive priority sector classification.
The RBI will allow banks to place their surplus liquidity to the extent of their Covid loan books with the regulator at a rate which is 40 basis points higher than the reverse repo rate.
The announcements follow the RBI governor’s meetings with various lenders over the last few days. On April 30, Das met with heads of small finance banks. On May 3, he met with heads of non-bank lenders. Various industry bodies, including Indian Banks’ Association, Finance Industry Development Council, real estate association Credai and the small business unit of Assocham, have all written to the central bank over the last two months seeking an extension of the scheme, among other measures.