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Finance Minister To Review Stress On Bank Loans

Finance Minister Nirmala Sitharaman would meet top executives of banks and non-banking financial institutions to review the implementation of the framework of stress on banks, caused by the unprecedented Covid-19 pandemic.

The review will be conducted on 3 September, which would be held up by a meeting with the top economists and financials.

The announcement of the meeting came forward by the KV-Kamath led panel’s recommendation in eligibility parameters for reconstructing loans to soften the blow towards borrowers as well as lenders in the wake of the pandemic.

The review would enable businesses and households to provide a framework based on viability and necessary steps like financing bak policies and identifying borrowers.

“This would enable discussing issues that require addressing for smooth and speedy implementation,” the finance minister stated on Sunday.

Earlier this Monday, RBI extended a special window for lenders to recast stressed retail as well as corporate loans without classifying them as non-performing as they set a 10% provision on such advances.

RBI governor Shaktikant Das has assured the resolution framework would be finalized by 6 September for Covid-19 stress. The banks have already started the internal process to gauge the likely loan reconstruction exercise.

For instance, Punjab National Bank saw 5-6 % of its loan book between Rs 36000 crore and Rs 43000 crore going to recast in FY 21.

The current repayment of the moratorium would expire on Monday after six months, where RBI has forecast its NPA may jump from 8.5% TO 12.5%, a 20-year peak by March 2021.

However NPA level may shoot to 14.7% by March 2021 in case of severity of economic stress. Pandemic has already taken the livelihood of various entities and has shaken the economic system.

It is necessary to deal with the upcoming challenges and clash of cash to counter loss that happened in the pandemic.

Image courtesy- Google

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