Small borrowers may get principal payment relief as part of one-time restructuring of loans

MUMBAI: Banks and shadow lenders may offer a six-month moratorium on principal repayments for retail and MSME borrowers as part of the one-time restructuring of loans that the central bank recently allowed, said people with knowledge of the matter. Customers seeking a debt revamp will be asked to make regular interest payments, while the principal will be restructured or the tenor extended, depending upon repayment ability. “The intention is to restructure loans for only those borrowers who really need restructuring, but in no way do we want to be in a situation that they are not paying interest,” said a senior executive at a state-run bank. “We want small-value borrowers in retail and MSME (micro, small and medium enterprise) segment to keep paying, so there will be a moratorium on principal payments.”The Reserve Bank of India (RBI) announced relief to help borrowers hit by the pandemic. A six-month moratorium on loan repayments ended August 31.The chief of a mid-sized nonbanking finance company (NBFC) said the term of the loan could be increased to offer relief.“Tenor to repay principal debt would be expanded, but since we are coming out of a six-month moratorium, we can’t have a policy that allows further leeway in interest payments,” he said. “We are also looking to club interest accumulated during the moratorium as part of principal debt.”According to a report by India Ratings, at least Rs 2.1 lakh crore (1.9% of banking credit) of retail loans that could turn into nonperforming assets may undergo restructuring. Overall, about Rs 8.4 lakh crore of total bank credit could be restructured, it said.77862709

from Economic Times https://ift.tt/2YSInaH