More COVID-hit businesses may need loan restructuring: Banks to RBI

Banks have told the Reserve Bank of India (RBI) that the protracted curbs because of the second wave of the COVID-19 pandemic have resulted in significant stress on businesses and that such companies may need a restructuring of loans.

Even though the central bank had permitted lenders to recast loans for borrowers earlier this month, the facility was limited to loans of up to Rs 25 crore.

Since the measures were announced, the COVID-19 cases surged across the country, leading to several states imposing some form of lockdown.

Also Read: NBFCs move RBI; seek loan recast, liquidity cushion as COVID-19 wreaks havoc

RBI Governor Shaktikanta Das held a virtual meeting with the CEOs of public sector banks (PSBs) on Wednesday.

He asked them to expeditiously implement the COVID-19 relief measures already announced by the RBI. Das affirmed the need for banks to raise capital to enhance the pliancy of their balance sheets should any further jolts stem from the pandemic.

The RBI governor sought feedback from banks on the state of the financial sector as well as credit flows to several sectors comprising small borrowers and MSMEs.

He also sought information on whether rate cuts by banks were in accordance with the RBI's action to bring down the cost of funds, The Times of India reported.

Also Read: Not many companies opt for loan restructuring, high cost a deterrent

Bankers responded that while the first quarter is commonly a torpid period for credit growth, the loan pick-up was even lesser due to the lockdown this year.

They added that the extended lockdown, although necessary to stem the further spread of the pandemic, is hurting a major segment of the economy.

Meanwhile, the NBFCs (Non-Banking Financial Companies) have already urged the RBI for a moratorium for their borrowers as well as their borrowings from banks.