Loan restructuring plan will help revive economy: RBI governor
The loan restructuring plan announced by the Reserve Bank of India on August 7 to help those hit hard by COVID-19 will help revive the economy, governor Shaktikanta Das has said, and allayed fears that it would result in non-performing assets.
The resolution plan will help businesses to revive and thereby the economy, he said in an interview to a business channel.
The financial health of banks is important, but it is also necessary to support businesses that are under a lot of strain due to the COVID pandemic, he said. The loan recast plan will help businesses starved of cash to bounce back, he said.
On August 7, in its monetary policy review, the central bank had allowed banks to restructure the loans of those finding it difficult to repay due to the crisis caused by coronavirus. It said banks could offer a repayment holiday and lower interest rates.
With the RBI’s approval for such a recast, banks will have some relaxation in the provisioning norms for accounts that need such restructuring.
The RBI had earlier allowed a loan moratorium for impacted borrowers till the end of August. Das said the moratorium was a “temporary” solution to tide over the COVID crisis and ensure cashflow of those severely affected.
He said we will overcome this pandemic. “I don’t know how much time it will take but we will definitely win this war against COVID,” Bloomberg quoted him as saying in the interview.
A complete lockdown for almost three months had hurt many businesses and resulted in many job losses, impacting the repayment capabilities of those affected. The loan restructuring plan is intended to help such accounts.
The lockdown had brought the economy to a complete halt and most experts have said it will result in a contraction in the financial year that will end in March 2021. A research report by SBI had said that the economy would shrink by about 16 per cent in the first quarter. Many expect the GDP to fall by about 6 per cent in the current financial year.
