Govt asks banks to obtain board approval for corporate loans restructuring by September 15

MUMBAI: The government has asked banks to obtain board approval for restructuring of corporate loans by September 15 after the K V Kamath-led committee submits its report in the first week. This was communicated to bank chiefs in their review meeting with finance minister Nirmala Sitharaman.Most banks have obtained board approval for restructuring of retail loans. The finance minister held a review meeting with the heads of all leading banks and finance companies through video conferencing on Thursday to review their preparedness for restructuring loans of borrowers that have come under stress related to Covid-19. In the meeting, the FM said that Covid-related distress must not impact the lenders’ assessment of their credit-worthiness. 77922097Banks have also been asked to be proactive and reach out to stressed borrowers who are eligible for restructuring. According to lenders, the eligibility of corporate borrowers can be determined only after the Kamath committee submits its report on the extent to which a loan in a particular sector can be restructured.Banks will soon upload on their websites FAQs on the resolution framework, and regularly update the same. In the meeting, lenders said that they have put their retail resolution policies in place and are in the process of identifying and reaching out to eligible borrowers. According to banks, loans in hospitality, toll road projects and retail malls are facing maximum stress and some may require deep restructuring.In a statement issued after the meeting, the government said that lenders have been advised to try and extend the maximum possible relief to borrowers before the festive season. It added that an amount of nearly Rs 1.6 lakh crore has been sanctioned as on August 31 under the Emergency Credit Line Guarantee Scheme, out of which more than Rs 1.1 lakh crore has also been disbursed. Under the Partial Credit Guarantee Scheme 2.0, bonds/CPs (commercial papers) of Rs 25,055 crore have been approved for purchase by public sector banks.The FM also exhorted the lenders to proactively respond to needs of companies and businesses, as well as those of individual borrowers, and to spearhead the efforts for rebuilding businesses desperate for help owing to Covid-19 distress, the statement added. Sitharaman appreciated the efforts of banks and NBFCs during the lockdown in effective implementation of the Pradhan Mantri Garib Kalyan Yojana and the Aatmanirbhar Bharat-related measures.

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