The Association of Indian Banks (IBA) and many other bodies have represented for both the government and the RBI for the unique restructuring, following major disruptions caused by the pandemic.
The central bank took note of all the suggestions and a detailed review of several recommendations is being carried out, the sources said.
Based on the assessment, the outlines would be outlined for the sector that may be eligible for the loan overhaul, the sources said, adding that something in this regard should reach the end of August, when the six-month moratorium ends.
Some of the sectors that can compete for loan reform are hospitality, tourism, aviation and construction.
In February, the RBI decided to extend the benefit of the single restructuring without downgrading the asset classification to standard accounts for micro, small and medium-sized enterprises (MSMEs) registered with GST that were in default on January 1, 2020, in accordance with the announcement of the budget.
“More than five million MSMEs benefited from the debt restructuring allowed by the RBI last year. The restructuring window would end on March 31, 2020. The government asked the RBI to consider extending that window until March 31, 2021,” Finance Minister Nirmala Sitharaman had said in the budget speech.
Last week, the finance minister said the government was negotiating with the RBI for a unique loan restructuring to help stressed companies.
Also in 2008, when the world was hit by the global financial crisis following the insolvency of Lehman Brothers, the RBI announced a restructuring of single loans to various sectors to help them overcome economic problems.
However, the benefit was misused by many borrowers and corporate banks, forcing the regulator to enforce the rules in 2015. The RBI also started reviewing asset quality in December 2015 to end the evergreening concept of accounts to keep them standard and avoid provisioning.
Subsequently, the default rule of one day was introduced and the resolution of default cases started to be dealt with in accordance with the Bankruptcy and Insolvency Code (IBC). PTI DP ANZ HRS
Legal Notice: – This story has not been edited by the Outlook team and is automatically generated from news agency feeds. Source: PTI