Banks want easier norms for relaxation on loan-restructuring guidelines for MSMEs

Banks are well-capitalized but are seeking easier norms from the Reserve Bank of India for relaxation on loan-restructuring guidelines for MSMEs. The Government has taken up some of the demands with the central bank.

The bankers believe they might need for the RBI to extend the deadline for COVID-hit companies to meet the ratios prescribed by the KV Kamath-led committee. The RBI, in a circular dated August 6, 2020, had allowed banks to restructure loans to companies in 26 sectors without classifying them as non-performing assets (NPAs).

One of the conditions for restructuring was that the companies would need to meet certain financial parameters by March 2022. Sources said corporates that wanted restructuring had to meet the prescribed ratios by the end of the current financial year. The Finance Minister Nirmala Sitharaman, during a meeting with the PSBs chiefs, complimented the state-run lenders for successfully implementing the Emergency Credit Line Guarantee Scheme (ECLGS) for small businesses. The minister made it clear that they should not rest on their laurels and push other government schemes and credit flow.

Sitharaman also urged the bankers to prepare for the possible impact of the Omicron variant as there has been a noted sharp increase in positive cases in India. And this has resulted in a number of states implementing restrictions. The Finance Minister urged bankers to ensure COVID-appropriate behavior.

The bankers, on their part, have warned the government that large-scale lockdowns would be damaging to the economy. The lenders are already working on business continuity plans. However, they fear that the contact-intensive services sector may require some support as their businesses could take a fresh hit due to the rising COVID-19 cases.

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The bankers told the Finance Minister that the loan repayment culture has improved but they also shared concerns that it would take a hit due to rising coronavirus cases and restrictions. But there are few signs of stress in businesses or personal loans.