COVID-19: PNB chief hopeful of RBI permitting one-off mortgage restructuring by October

New Delhi, July 6

Punjab National Bank Managing Director SS Mallikarjuna Rao on Monday expressed hope that the Reserve Bank will unveil by October its mortgage restructuring mechanism for some sectors severely hit by the COVID-19 pandemic.

Rao additionally stated that the normalcy remains to be too far which is making it troublesome to evaluate the state of affairs of corporations by way of cash-flows.

“We have requested RBI to permit restructuring. Bankers together have requested, through Indian Banks’ Association (IBA), to RBI that you need to look at a one-time restructuring in all these accounts so that bankers will undertake the restructuring properly by analysing the cash flow. However, the account should not become NPA,” he stated throughout a webinar organised by CII.

Citing an instance of the US Federal Reserve, Rao stated, the Fed has determined to immediately lend corporates with two years’ instalment moratorium and one-year curiosity moratorium, in addition to providing longer durations for compensation.

It, he burdened, signifies normalcy restoration by a few of the industries goes to take longer. As per norms, Rao stated, an account is handled as an NPA (non-performing asset) whether it is restructured and provisions should be made accordingly.

Therefore, banks by means of IBA have requested the RBI for forbearance with regard to restructuring norms.

“I imagine within the current board assembly they (RBI) have mentioned. However, issues might come out after a while. We can wait and see as a result of as on at the moment nonetheless we’re unable to evaluate the money circulation of any unit as a result of they haven’t come to normalcy.

“So probably in the month of September and October you will have a better visibility in understanding about the cash flow, by which time, I am expecting that some decision in this regard could come from RBI,” he stated.

The Reserve Bank in its 583rd board assembly on June 26 mentioned present macroeconomic state of affairs and evolving challenges being posed by the COVID-19 pandemic.

In February, the RBI determined to increase the advantage of one-time restructuring with out an asset classification downgrade to straightforward accounts of GST-registered micro, small and medium enterprises (MSMEs) that had been in default as on January 1, 2020, in keeping with the Budget announcement.

“More than five lakh MSMEs have benefitted from restructuring of debt permitted by the RBI in the last year. The restructuring window was to end on March 31, 2020. The government has asked the RBI to consider extending this window till March 31, 2021,” Finance Minister Nirmala Sitharaman had stated within the Budget speech.

Last month, the finance minister stated the federal government is in talks with the RBI for a one-time restructuring of loans to assist burdened corporations.

In 2008 additionally, when the world was hit by the worldwide monetary disaster, the RBI had introduced a one-time mortgage restructuring for a number of sectors to assist them tide over the financial woes.

However, the profit was misused by many company debtors and banks, compelling the regulator to tighten the principles in 2015.

The RBI additionally initiated asset high quality evaluate in December 2015 to place an finish to the idea of evergreening of accounts to maintain them commonplace and keep away from provisioning.

Subsequently, one-day default norm was launched and backbone of default instances is now dealt as per the Insolvency and Bankruptcy Code (IBC). PTI

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