According to Economic Times, Indian Banks Association (IBA) requested the Reserve Bank of India (RBI) to extend the restructuring window proposed by the KV Kamath committee by another three months to March 31, 2021. The window to seek restructuring is set to lapse on December 31.
Bankers have requested the regulator that due to the case in the Supreme Court leading to a prolonged moratorium, they have been unable to evaluate the borrower cash flows. Also, with borrowers placing all their hopes on the Supreme Court verdict in the loan moratorium case, several customers have requested for more time to submit recast requests.
The IBA coordination committee set up to study recast progress of COVID-19-related cases had held regular feedback meetings with Kamath committee members and addressed the need to extend timelines. “Borrowers are confused about whether to go for restructuring or wait for the SC verdict. Even if the SC verdict comes soon, a lot of time has been wasted,” said another official in the know. “Bankers, on the other hand, are facing the challenge to keep these stressed assets standard, which is the main request of the recast framework.”
The Supreme Court has been processing petitions of borrowers seeking the waiver of interest on loans during the moratorium period. The court has instructed that no account should be declared a non-performing asset (NPA) if hadn’t been put into that category by August 31 until further orders. The Kamath committee was set up to provide relief to borrowers affected by the pandemic, to define one-time recast framework. The Kamath committee defined recast thresholds for 26 stressed sectors. Banks are required to make 10% provisioning on all loans recast.
ET recently reported that bankers had communicated their grievances to the Kamath committee that they don’t expect more than seven to eight large-value cases with a debt of more than Rs 1,500 crore each to be recast under the COVID-19 restructuring scheme. There were approximately 387 accounts with an exposure of more than Rs 1,500 crore that was standard at the end of March.
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