RBI To?Allow?One-Off Loan Restructuring

The Reserve Bank of India may allow banks to restructure company loans without having to set aside funds to cover potential losses as a one-time exemption to ease the strain on businesses and lenders during the coronavirus pandemic. Though banks are allowed to recast loans under guidelines set out in RBI’s 7 June 2019 circular, they will be required to make higher provisions, crimping their profits. A one-time restructuring of loans was one of the suggestions made by the banking industry to help firms affected by the covid-19 pandemic. Even though some businesses require more help than others, a debt recast, if allowed, has to be for all. Any debt recast has to come with “some conditions". Banks are asking for restructuring forbearance for other large accounts by exempting them from declaring these accounts as NPA. On 17 April, RBI asked banks to make 10% provisions for all loans under the three-month moratorium announced on 27 March and said banks will get 90 more days to resolve assets under the 7 June 2019 circular.