RBI may allow one-off restructuring of stressed loans

RBI may allow one-off restructuring of stressed loans

The Reserve Bank of India (RBI) 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, a senior central bank official said.

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.

“The option is on the table… When and in what manner, we have to see," the official said, adding that there were representations against allowing debt restructuring on the grounds that the ongoing loan moratorium was sufficient, and that funds might get diverted in a debt recast.

Even though some businesses require more help than others, a debt recast, if allowed, has to be for all, the official cited above said on condition of anonymity, adding any debt recast has to come with “some conditions".

An RBI spokesperson declined to comment on the issue.