Last week, after many requests from industry and the government, the Reserve Bank of India (RBI) allowed banks to restructure all loans, without calling them non-performing assets (NPAs), but there were strict conditions.
Loans had to be regularly serviced till February, which means they have to clearly be COVID-19 victims to avail of the restructuring. Also, they can be extended for a maximum of 2 years.
An independent KV Kamath panel and a rating agency will vet the restructured proposals to see if they are viable or whether they have to be marked as NPAs. Plus, restructured loans will be marked as NPAs if they default for 30 days.
But none of this applies to retail loans, MSME loans, which already have forbearance, can be restructured all the way till March 31, 2020. While bankers and entrepreneurs have welcomed the proposal as a necessary move in the face of the pandemic, brokerages like Credit Suisse and rating agencies have said this only dents the transparency of financial institutions and may in fact keep investors away. Their advice is to take the hit and move on.
CNBC-TV18’s Latha Venkatesh analysed the contours of the loan recast scheme in a discussion with three veterans - SS Mundra, Former Deputy Governor of RBI, Ashish Gupta of Credit Suisse and Krishnan Sitaraman of CRISIL. Here's that conversation.