Nirmala Sitharaman's Loan Resolution Schemes By Mid-September 2020

LOAN RESOLUTION SCHEME BY MID-SEPTEMBER

          Finance Minister Nirmala Sitharaman also said that Covid-19 related distress must not impact their assessment of borrowers.

          Finance Minister Nirmala Sitharaman on Thursday asked bankers to roll out loan resolution schemes by September 15. The finance Minister also said that COVID-19 related distress must not impact their assessment of borrowers' creditworthiness. She said lenders must immediately put in place board-approved policies for resolution, identifying eligible borrowers and reach out to them. There should be a quick implementation of a sustained resolution plan by lenders for the revival of every viable business and to small firm also, said Ms Sitharaman during a review meeting with heads of scheduled Commercial banks and non-banking finance Companies (NBFCs).

          An official statement said the lenders assured that they are ready with their resolution policies, have started the process of identifying and reaching out to eligible borrowers and that they will complete with timelines stipulated by the Reserve Bank of India (RBI)

           The Ministry of finance has also been engaging with the RBI to ensure that the lenders are assisted by the Central bank in the resolution process.

           The finance Minister also reviewed the progress made by various lenders under the Emergency Credit Line Guarantee Scheme (ECLGS), The partial Credit Guarantee Scheme (PCGS) 2.0 and the Sub-Ordinate Debt Scheme, announced as part of the government's Aatmanirbhar Bharat measures.

           August 31 as non-performing even if there is a default, till further orders.Bankers are hopeful that they also won't have to set aside funds to cover losses once a loan turns bad because of the temporary freeze in asset classification.

           Repayments were expected to begin on September 1 after the six-month moratorium ended a day earlier. This interim order will largely benefit borrowers who were on the brink of defaulting or were closer to the 90-day overdue mark, after which loans are classified as non-performing.

           Such loans divided into special mention account 1 (SMAI) and SMA2, are estimated to be worth rupees 5.7 lakh crore. Therefore, loans which can avail of the debt recast still have at least two months before they turn non-performing.

           Supporting this submission, senior counsel Harish salve, representing the Indian Banks Association, added that customised plans are required to mitigate the issues of loan payment.