Covid-19: Bankers favour a flexible loan revamp plan to help small borrowers

With economic uncertainty looming amidst surging coronavirus cases and lockdowns put in place by several States, many banks are understood to favour a flexible loan restructuring package, especially to help small borrowers and entrepreneurs.

“Banks don’t want customers to feel like delinquents or get NPA tags just because of the pandemic and economic situation. A flexible restructuring programme for banks to help out customers at this point in the crisis would be helpful,” said a source familiar with the development.

The proposal of a flexible loan restructuring scheme is understood to have also been discussed at recent meetings of the Reserve Bank of India with bankers.

While the first 15 days of April saw normal collections for most banks and non-banking financial companies, there are worries going ahead.

“No one is sure how the month of May will pan out,” said the source.

Amitabh Chaudhry, Managing Director and CEO, Axis Bank had said at the fourth-quarter results that he expects collections to be impacted in coming weeks due to the local lockdowns though they have been strong in the initial weeks of the fiscal year.

Yes Bank MD and CEO Prashant Kumar also said that till April 15, collection efficiency for the lender was at 96 per cent, but there would be some impact after that though data is not available.

The Finance Industry Development Council recently requested the RBI for restructuring stressed retail and individual borrowers of NBFCs whether or not they had sought it earlier.

Needed an umbrella policy

“We need an umbrella policy offering options for restructuring including permission to undertake simple process for business restructuring, inducting new investor, restoring finance or any assistance to rebuild operations of SMEs, MSMEs, start-ups, retail borrowers ignoring their previous defaults, if any. The second and third wave could be more lethal and we need more human policy then regulatory flexibility,” said Nitin Potdar, Partner, J Sagar Associates.

While industry and bankers are hoping that the government and RBI will announce a fresh set of relief measures, some lenders believe that a fresh round of loan restructuring may not be the best way forward.

“It is still early days and more data may be needed on collection trends. We should not use restructuring to postpone the problem,” said a banker, who did not wish to be named.

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