Banks’ plea seeking time for borrowers to comply with new loan recast plan rejected

The Reserve Bank of India (RBI) has turned down the request of banks seeking an extension for borrowers to comply with financial parameters prescribed by the Kamath Committee on restructuring of loans.

A senior bank executive confirmed the development and said that the banking sector regulator has confirmed its stance to both banks and Indian Banks’ Association (IBA). Banks individually and through IBA had reached out to the RBI seeking extension of the deadline till March 2023 on account of resurgence of the Covid-19 pandemic.

“The regulator has informed us that while it continues to monitor the evolving situation, no additional regulatory accommodation is contemplated at present,” the executive said on condition of anonymity, adding that a similar response was sent to IBA last month.

An email sent to the RBI did not elicit any response till press time.

In August 2021, the regulator had extended the deadline for stressed companies to meet the parameters related to operational performance to October 2022.

“The RBI has reiterated its stand that regulatory reliefs have been formulated following a careful consideration of the possible economic fallout from the resurgence of the pandemic while keeping in view the financial stability and prudential considerations,” said another executive, who did not wish to be identified.

Set up by the RBI, Kamath committee had defined recast thresholds for 26 stressed sectors. Banks are required to make 10% provisioning on all loans recast.

Banks had argued that non-compliance by borrowers might result in burdening the banks with additional bad loans and that due to the Omicron wave the deadline for achieving the financial parameters stipulated by the Kamath Committee for accounts restructured under the Covid-19 framework might be breached.

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