Finance Minister Nirmala Sitharaman asks banks, NBFCs to launch loan resolution schemes by September 15

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The finance minister said that lenders should immediately put in place board-approved policy for resolution, identifying eligible borrowers and reaching out to them

Union Finance Minister Nirmala Sitharaman asked banks and non-banking financial companies (NBFCs) to launch loan resolution schemes by September 15 and called upon them to support the borrowers when the moratorium on loan repayments is lifted.

The six months moratorium on payment of EMIs ended on August 31.

Talking to the heads of the scheduled commercial banks and NBFCs through video conferencing on Thursday to review their state of preparedness for implementation of the loans resolution framework for COVID-19 related stress, Sitharaman said that the distress during pandemic should not impact the lenders’ assessment of their creditworthiness.

Sitharaman emphasised that resolution schemes must be rolled out by lenders by September 15 and a sustained media campaign to create awareness be carried out thereafter.

The finance minister said that lenders should immediately put in place board-approved policy for resolution, identifying eligible borrowers and reaching out to them.

She also said that quick implementation of a sustained resolution plan by lenders for revival of every viable business.

She advised lenders to ensure that regularly updated FAQs on the resolution framework are uploaded on their websites in Hindi, English and regional languages, and also circulated to their offices and branches.

“The lenders assured that they are ready with their resolution policies, have started the process of identifying and reaching out to eligible borrowers, and that they will comply with the timelines stipulated by the Reserve Bank of India (RBI),” she said.

The Ministry of Finance has also been engaging with RBI to ensure that the lenders are assisted by RBI in the resolution process. 

The Finance Minister also reviewed the progress made by various lenders under ECLGS, PCGS 2.0 and sub-ordinate debt schemes announced as part of the ‘Aatmnirbhar Bharat Abhiyaan’, and advised lenders to try and extend the maximum possible relief to borrowers before the festive season.

An amount of Rs 1.58 lakh crore has been sanctioned as on 31.8.2020 under ECLGS, out of which more than Rs 1.11 lakh crore has also been disbursed.

Under PCGS 2.0, bonds/CPs of Rs 25,055.5 crore have been approved for purchase by public sector banks so far, out of which Rs 13,318.5 crore amounting to more than 53 percent of the portfolio pertains to bonds/CPs rated below AA-. The Scheme has thus been a crucial intervention for lower rated Bonds/CPs.

The finance minister also hailed the efforts of the banks and NBFCs during the lockdown in effective implementation of the Pradhan Mantri Garib Kalyan Yojana and the Aatmnirbhar Bharat related measures. 

Sitharaman also exhorted the lenders to proactively respond to needs of companies and businesses, as well as those of individual borrowers, and to spearhead the efforts for rebuilding businesses desperate for help owing to COVID-19 related distress.

Image credit: Twitter

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