Extra COVID-hit companies might have mortgage restructuring: Banks to RBI

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Although the central bank allowed lenders to re-extend loans to borrowers earlier this month, the facility was limited to loans of up to Rs.25 billion

The banks have told the Reserve Bank of India (RBI) that the protracted restrictions due to the second wave of the COVID-19 pandemic have placed a significant strain on businesses and that these businesses may need credit restructuring.

Although the central bank allowed lenders to re-extend loans to borrowers earlier this month, the facility was limited to loans of up to Rs.25 billion.

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

Also Read: NBFCs Move RBI; Looking for a new version of the loan, 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 urged them to swiftly implement the COVID-19 relief measures already announced by the RBI. That reaffirmed the need for banks to raise capital to improve balance sheet uniformity should the pandemic provoke further shocks.

The RBI governor asked banks for feedback on the state of the financial sector as well as credit flows to several sectors, including small borrowers and MSMEs.

It also sought information on whether bank rate cuts were in line with RBI’s measures to lower the cost of money, The Times of India reported.

Also read: Not many companies opt for loan restructuring, high costs are a deterrent

The bankers responded that while the first quarter was a sluggish time for credit growth, borrowing was even lower due to the lockdown this year.

They added that the expanded lockdown, while necessary to contain the further spread of the pandemic, is hurting a large part of the economy.

In the meantime, the NBFCs (Non-Banking Financial Companies) have already asked RBI to put a moratorium on their borrowers as well as on their bank loans.