Private Bank CEOs Pitch For Moratorium, Large Corporate Restructuring

Chiefs of private sector banks, who met with Reserve Bank of India Governor Shaktikanta Das on Tuesday, have pitched for a limited moratorium of payments and a wider window to restructure dues.

Private bank chief executives requested that the RBI allow banks to offer a moratorium on payments between April and June, according to two bankers who attended the meeting. This is to ensure that the borrowers who were unable to pay their dues since April, due to the second wave, are not classified as non-performing assets by June 30, they said.

While these loans will most likely be restructured under the extended one-time restructuring scheme, banks are likely to invoke the scheme only in August-September. In the meantime, the moratorium will allow these borrowers to remain standard, the bankers quoted above said.

According to a statement by the RBI on Tuesday, Governor Das reviewed the implementation of relief schemes announced on May 5 during the meeting. He also urged banks to continue providing banking services, including credit facilities to those impacted by the pandemic. Das had held a similar meeting with public sector bank chiefs on May 19.

Private bank CEOs also sought a wider window under the reopened one-time restructuring scheme. They want the restructuring to be opened for large corporate borrowers in contact-intensive sectors such as aviation, hotels and hospitality, as well as restaurants.

On May 5, when the RBI had reopened the one-time restructuring up to Sept. 30, it had said banks can invoke it only for retail, small business borrowers.

The one-time scheme allows banks to restructure dues without downgrading the accounts to the NPA category. The provisioning requirement is also lower at 10% for these accounts.

As part of the restructuring, banks can offer a moratorium on payments or extension of repayment schedule by up to two years, according to the RBI. Private banks CEOs want the two-year period to be extended to three years for borrowers who were restructured last year, the bankers quoted above said.

According to the first of the two bankers quoted above, these restructured borrowers have already lost one year of operations due to the Covid-19 pandemic. It would not be possible for them to immediately start repayments with just a two-year moratorium under the scheme, the banker said.

When the one-time restructuring scheme was introduced in August, corporate borrowers had stayed away from using it much, with only retail borrowers dominating the restructured portfolio. Speaking to reporters last week, State Bank of India Chairman Dinesh Khara said the corporate borrowers had largely kept away from the scheme as it could impact their ratings.

Even among MSME borrowers, those who had availed additional credit facilities under the government’s Rs 3 lakh crore emergency credit guarantee linked scheme had largely stayed away from restructuring their dues.