FM tells banks to frame loan recast scheme for all viable units by Sept 15

Finance Minister Nirmala Sitharaman on Thursday told banks to put in place by September 15 loan restructuring schemes to rescue all viable business units affected by the Covid-19 pandemic. She was holding a review meeting with heads of scheduled commercial banks and non-banking financial companies (NBFCs) through videoconferencing.

Top bank executives suggested key changes to the Reserve Bank of India’s (RBI’s) loan restructuring scheme to accommodate borrowers who faced stress for a longer period of time, besides lowering the provisioning requirements for restructuring housing loans, the chief executive officer of a bank said, requesting anonymity.

Finance ministry officials told bankers the ministry was in touch with the RBI to ensure that the regulator provided assistance to them in the resolution process.

“During her interaction, the finance minister focused on lenders immediately putting in place a board-approved policy for resolution, identifying eligible borrowers and reaching out to them, and the quick implementation of a sustained resolution plan by lenders for the revival of every viable business,” the finance ministry said in a statement.

Banks have to approve their own loan restructuring scheme, which was allowed by the RBI in August for all types of borrowers – corporate, MSME, and personal loan segments.

The meeting was held to “review their state of preparedness for implementation of the loans resolution framework for Covid-19 related stress”.