File photo dated Nov. 23, 2016 of former finance secretary Shaktikanta Das who has been appointed as the new governor of Reserve Bank of India. (Source: PTI)

MSME Debt Restructuring Only After Examining Viability, Says RBI’s Das

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Noted Views Of MSME Sector On Recent Loan Restructuring, Says RBI Governor

The Reserve Bank of India Governor Shaktikanta Das met representatives from micro, small and medium industries to note their views on the recent loan restructuring scheme announced by the central bank.

The views and demands of small businesses on the issue have been noted, Das told reporters after the meeting.

Last week, the RBI announced a one-time restructuring scheme for small borrowers who have taken loans of up to Rs 25 crore from banks and non-bank lenders. Under the new scheme, accounts in the micro, small and medium enterprises segment which are in default, but are still standard as on Jan. 1, can be restructured once, without any downgrade on their asset classification.

Das said that banks have been asked to look into the viability of individual MSMEs before restructuring loans. The effort, according to him, is to see that maximum number of such businesses get the benefit, but while extending the benefit, the viability aspect needs to be considered.

Banks, he said, have been asked to take the matter to their respective boards, and come with guidelines to check the viability of individual loans and also monitor such restructured assets.

On being asked if the MSME loan restructuring scheme is a retrograde step, Das said that the central bank has examined the situation very carefully and MSMEs have an important role in the economy. "The Reserve Bank, in its wisdom, after considering all aspects thought it prudent in the overall interest of the economy, banks, MSMEs to come out with those guidelines," Das said.

Das also said that he would be meeting representatives from non-banking financial companies in Mumbai on Tuesday. The meeting, he said, has been called to understand NBFCs' perspective on various issues, including liquidity. “At the same time I must also add RBI would not like a situation where liquidity becomes a kind of loose money."

Any infusion of liquidity will have to be carefully considered, and has to be need-based, Das said, adding that caution and care have to be exercised by the RBI so that excess liquidity does not create adverse consequences.

The RBI had increased its open market operations by Rs 10,000 crore in December and had announced an OMO of Rs 50,000 crore for January.

Talking about the non-performing assets, Das said that there has been a reduction in bad loans of the banking sector, and public sector banks in general. "There is a considerable amount of improvements which have to be sustained if banks have to fulfil their responsibility and if some of the banks have to become healthy," he said.

The central bank, according to Das, has not given any target to banks for reducing their NPAs. "So Reserve Bank of India will listen to everybody, Reserve Bank of India will interact with everybody including the government, but the final decision will be taken by the RBI in an objective manner to the best of its judgement," Das said.

The governor also said that he has had consultations with various stakeholders to look at governance reforms that can be brought in the working of state-owned banks. "We do not want to create a framework which imposes restriction or throttle the functioning of banks," he said.

Responding to a query on whether the government has sought an interim dividend from the RBI, Das said that a "lot of correspondence goes on between the government and the Reserve Bank, a lot of discussions do take place, whether there is an individual letter or not, that is not really relevant."

A Reuters report, quoting unnamed officials, said that the government has sought an additional dividend of Rs 30,000-40,000 crore this financial year to meet its fiscal deficit target.

Shaktikanta Das On Farm Loan Waivers

States have to decide if they have the fiscal space for farm loan waivers. Any generalised write-off obviously has adverse impact on credit culture and future credit behaviour of borrowers.
Shaktikanta Das, Governor, Reserve Bank Of India

Das’s comments come amid the Narendra Modi government’s efforts to alleviate farm distress in the country.

In the past month alone, three Indian states—Assam, Chhattisgarh and Madhya Pradesh—have announced schemes to waive farm loans. They join a growing list of state governments which have resorted to such waivers in the past two years.

No Decision On Interim Dividend Payment

The central bank has not taken a decision on the interim dividend payment yet, Das said.

While a lot of discussions taken place between the RBI and the government, no specific communication has taken place regarding this, he added.

Reuters, in a report today, said that the RBI is likely to transfer an interim dividend of Rs 30,000-40,000 crore to the government by March, citing sources.

In August, the RBI had said that it would transfer Rs 50,000 crore as surplus to the government in its financial year ended June 30. RBI follows the July-June cycle as its financial year.

Economic Affairs Secretary Subhash Chandra Garg told reporters in August itself that the RBI had transferred Rs 10,000 crore as interim dividend in March, and the government will receive the remaining amount this fiscal.

Bank's NPAs Remain A Focus

The health of India’s banks and managing their non performing assets remains the main focus for the central bank, Das said.

“The NPAs are being monitored on a daily basis,” he said, adding that improvement has been noticed in bad loan levels.

The RBI is also in consultation with stakeholders to create a governance framework of public sector banks without putting impediments in the working of banks, he said.

More Meetings Lined Up

Das is slated to meet representatives from the non banking financial companies industry tomorrow, to take a stock of the liquidity crunch plaguing the sector after infrastructure sector lender IL&FS started defaulting on its payments.

“The liquidity has been assessed time and again”, he said, adding that the RBI has already announced OMOs worth Rs 60,000 crore.

Any infusion of liquidity has to need based so that it does lead to excess liquidity.
Shaktikanta Das, Governor, Reserve Bank Of India