Banks are going to be catalyst for economic revival: Nirmala Sitharaman

Nirmala Sitharaman

Finance Minister Nirmala Sitharaman urged banks to support borrowers who are in distress after the loan moratorium is lifted, and not let pandemic-related stress impact assessment of their creditworthiness.

Sitharaman, in a meeting to review banks’ preparedness for implementation of loan resolution framework for Covid-19-related stress, told the lenders “to proactively respond to the needs of companies and businesses, as well as those of individual borrowers, and to spearhead the efforts for rebuilding businesses desperate for help”.

Banks have been asked to immediately put in place board-approved policy for resolution of stressed accounts, identifying eligible borrowers and reaching out to them, a statement by the Ministry of Finance said. The lenders have been asked for quick implementation of a sustained resolution plan for revival of every viable business by Sept. 15. After the finalisation of the resolution scheme, banks must conduct a media campaign to create awareness about it, she said.

The lenders, in turn, have told the Finance Ministry that they’re ready with resolution policies, and have started the process of identifying and reaching out to eligible borrowers, and will comply with the timelines stipulated by the Reserve Bank of India.

This comes even as the Reserve Bank of India-mandated moratorium on loan repayments for six months until Aug. 31. is expected to lead to a jump in the country’s bad loan ratio, already the world’s worst. The central bank offered the moratorium as the coronavirus lockdown, effective March 25, shuttered businesses and left millions jobless, pushing India’s economy toward a full-year contraction in more than four decades. The Supreme Court is hearing a case challenging the payment of interest component during the moratorium period. The top court has also decided to hear a separate plea to extend the moratorium until year-end.

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