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Banks receive requests to recast 1.10 lakh accounts so far; IBA seeks relaxations in debt restructuring scheme

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The Indian Banks Association wrote to RBI on behalf of banks on Wednesday, requesting the regulator to allow standstill status for eligible borrowers, said people in the know.

Banks have sought the Reserve Bank of India’s permission to keep accounts of borrowers who are eligible for relief under the August 6 circular in a standstill until the date of invocation of restructuring, multiple people aware of the talks told CNBC-TV18.
The Indian Banks Association wrote to RBI on behalf of banks on Wednesday, requesting the regulator to allow standstill status for eligible borrowers, said people in the know. The request was made as banks fear that several borrowers’ accounts may slip into a non performing asset (NPA) category the moment Supreme Court vacates its September 3 order on asset classification for accounts under the six-month moratorium. This, in turn, would make such borrowers ineligible for restructuring.
As an interim measure considering the hardships of the pandemic and moratorium, the top court stated that “accounts which were not declared NPA till August 31, 2020, shall not be declared NPA till further orders.”
The August 6 restructuring circular of RBI states that only those borrowers whose accounts were not more than 30 days past due, or Special Mention Account-0 (SMA-0) category on March 1, 2020, would be eligible for relief under the scheme. Further, RBI granted a six-month moratorium relief to borrowers impacted due to COVID-19 from March to August 2020, during which time their accounts were kept as standard and not downgraded.
“What happens when the Supreme Court lifts the stay on NPA classification in the next hearing on 14th (December 14)? Then many accounts will slip and create problems for us,” said a senior banker involved in the deliberations.
“As it is there are very few restructuring requests, and without standstill, many will become eligible and not be able to get restructuring,” said another person quoted earlier.
CNBC-TV18 has learned that so far, only 1.10 lakh borrowers have come forward to seek restructuring from lenders under the August 6 recast circular. Of this, the State Bank of India alone has received requests to restructure approximately 40,000 MSME loans, and about 4,000 retail loans so far. As for the large accounts with an exposure of more than Rs 1,500 crore, no more than 10 or at most 15 borrowers will end up applying, said senior banking executives.
The window to apply for the one-time restructuring scheme announced by RBI ends on December 31, 2020, and the last date of implementation will end on June 30, 2021.

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