A lobby representing lenders is likely to approach the Reserve Bank of India for a special relief on stressed asset classification amid the disruption caused by the novel coronavirus outbreak, two bankers aware of the matter said.
The Indian Banks' Association is in the process of drafting a proposal seeking more time to classify certain micro, small and medium enterprises as well as mid-corporates as non-performing assets, if they fail to repay loans on time, the bankers told BloombergQuint on the condition of anonymity. The proposal, according to the first of the two bankers, will likely seek a 30-60 day extension on the income recognition and asset classification norms that govern NPA disclosures by banks.
The second banker quoted above said the special dispensation should be different from the RBI's one-time restructuring scheme for MSMEs announced last month. The banking regulator had said MSMEs with outstanding loans up to Rs 25 crore would be allowed a one-time restructuring of their loans till Dec. 31, if they are standard but stressed as on Jan. 1. The scheme was originally announced in January 2019 and was to end on March 31, 2020.
This IBA's proposal comes at a time the spreading pandemic Covid-19 across the world threatens to stall economic growth. On Monday, the RBI joined global peers in stepping up emergency actions to deal with the dislocation in financial markets due to the outbreak and counter its economic impact.
RBI Governor Shaktikanta Das announced two special measures to ensure better liquidity in the banking system. The regulator will conduct a second six-month U.S. dollar sell-buy swap on March 23 and long-term repo operations worth up to Rs 1 lakh crore.
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While, unlike global peers, India's central bank stayed away from announcing any emergency rate cuts, Das didn't rule out the possibility of a similar move.
“We are not ruling out anything,” he said, adding it is important that the policy space is used appropriately and suitably timed to optimise the impact. The monetary policy committee will meet between March 31 and April 3.
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RBI also released an advisory for heads of banks and financial institutions, asking them to review their business continuity plan to better monitor and manage the impact of Covid-19. Besides, the regulator asked banks to encourage their customers to conduct more digital transactions, to avoid the need to approach branches.
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