Finance Minister Nirmala Sitharaman urges banks to support borrowers after loan moratorium is lifted


Finance Minister Nirmala Sitharaman urged banks to support struggling borrowers after the moratorium on lending is lifted and not to let the stress of the pandemic assess their creditworthiness.

Sitharaman, in a meeting to review banks’ readiness to implement the Covid-19 stress loan resolution framework, told lenders “to proactively respond to the needs of businesses and businesses , as well as those of individual borrowers, and lead efforts to rebuild businesses desperate for help ”.

Banks were urged to immediately put in place a board-approved policy for resolving distressed accounts, identifying eligible borrowers and making contact with them, according to a finance ministry statement. Lenders have been urged to quickly implement a sustainable resolution plan to revive all viable businesses by September 15. After the resolution plan is finalized, banks should conduct a media campaign to raise awareness about it, she said.

The lenders, in turn, have told the Ministry of Finance that they are ready with resolution policies, and have started the process of identifying and contacting eligible borrowers, and will adhere to deadlines stipulated by the Reserve Bank. of India.

This comes even as the Reserve Bank of India has mandated moratorium on loan repayments for six months until August 31. should lead to a jump the country’s bad debt rate, already the worst in the world. The central bank proposed the moratorium because the coronavirus lockdown, effective March 25, closed businesses and left millions unemployed, pushing India’s economy into an annual contraction in more than four decades. The Supreme Court hears a case challenging the payment of interest during the moratorium period. The higher court also decided to hear another advocacy extend the moratorium until the end of the year.

Aatmanirbhar Bharat Package Review

Sitharaman also reviewed the programs announced as part of “Aatmanirbhar Bharat” – the Rs 20-lakh-crore post-pandemic financial bailout.

Under the emergency line of credit Guarantee The program, around Rs 1.6 lakh crore was sanctioned, of which Rs 1.1 lakh crore was disbursed by the banks as of August 31st.

The Partial Credit Guarantee Scheme 2.0, announced to provide liquidity support to non-bank lenders, saw public sector banks approve the purchase of bonds and commercial paper from shadow lenders valued at Rs 25,055 crore, the statement said.

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