A second Covid wave many times worse the first has prompted banks, non-banking financial companies (NBFCs) and small-finance banks to ask Reserve Bank of India (RBI) that flexible restructuring up to two years across all categories of borrowers be allowed. Three people aware of the development said financial institutions have asked RBI to classify the second wave as a national natural calamity.
They have also asked that easier terms of repayment and moratorium on principal payments should be given to borrowers below the Rs 2 crore category, where, they say, the impact of the pandemic has been felt severely, people cited above said. They spoke on the condition of anonymity.
In addition, lenders have sought a cut-off time till September 2021 for fresh restructuring proposals for all standard accounts and requested that restructuring be allowed outside the framework prescribed by the KV Kamath committee. The committee, formed in the wake of the Covid first wave, had earlier prescribed recast criteria for 26 sectors.“We have presented to the regulator that the impact of the second wave has been felt severely and this should be considered as a national natural calamity and flexible restructuring rules should be allowed.” said the CEO of a large public sector lender. “The RBI governor and all senior staff are looking favourably at this proposal and we are hoping some relief measures will be announced soon.”
Another lender said that during interactions with the RBI brass, they have requested cash-flow-based recast relief. “We have requested that a cash-flow-based tenor balancing be allowed so that recast of borrower accounts can happen on the basis of their ability to service debt,” said the CEO of a NBFC.
“India is seeing the worst crisis in a century and this requires extraordinary and urgent measures so that we deal with it in a timely fashion.”
RBI governor Shaktikanta Das and his deputies have held several meetings with public and private sector banks, small finance banks, NBFCs and micro-finance institutions to take stock of the current economic situation. Among topics discussed were the impact of the second Covid wave on bank balance sheets, liquidity buffers created by banks and credit flows to different segments of borrowers like retail and medium and small enterprises. “We have requested RBI that borrowers below the Rs 2 crore category be treated separately and more flexibility be allowed for such borrowers,” said the CEO of a small finance bank. “We have sought that accounts which are zero to 60 days due be considered for recast as they are facing tremendous pressure.”
In the first wave the regulator had introduced a one-time restructuring scheme. The committee had prescribed recast thresholds for 26 most affected sectors. Banks are required to make 10% provisioning on all loans recast. The window to seek restructuring under this scheme lapsed on December 31.
