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New Delhi, In a major relief to corporate and retail borrowers, the Reserve Bank of India (RBI) today allowed banks to go for one-time restructuring of loans that are facing Covid-19 stress, while keeping interest rates unchanged because of prospects of high inflation rates and perilous state of the economy.
The restructuring of loans will be allowed as per the prudential framework issued on June 7, 2019. Only accounts classified as standard, but not in default for over 30 days as on March 1, 2020, will be eligible
In a measure that will affect the flow of credit at the grass-roots level, RBI Governor Shaktikanta Das said priority sector lending guidelines in the social sector had been revised after five years. There will be incentives for banks to lend to low credit-flow districts, small and marginal farmers and the weaker sections.
Earlier, the RBI’s Monetary Policy Committee (MPC) decided in favour of unchanged interest rates after headline inflation breached the upper limit of six per cent in June and could rise further due to floods in eastern India, ongoing lockdown-related disruptions, high taxes on petroleum products, and rise in gold prices on safe haven demand.
The RBI saw agriculture as the sole bright spot; its prospects strengthened on the back of good progress of the southwest monsoon. At the same time there was a clear appreciation of the dangers ahead: “The outlook is heavily contingent on the heightened risks associated with a second wave of infections and the discovery of a vaccine.”
The RBI decided on six steps that would fine-tune policy instruments in several areas. These include enhancing liquidity support for Nabard and National Housing Bank (NHB) by Rs 5,000 crore each; easing financial stress by setting up an expert committee headed by noted banker KV Kamath to restructure corporate and personal loans under stress due to the lockdown and extending the date for restructuring of MSME loans; putting in place safeguards for receiving bank credit; hiking the limit for advances against gold ornaments and jewellery from 75 per cent to 90 per cent till March 31 for higher credit flow; deepening digital payment systems by facilitating retail payments in offline mode; and increasing customer safety in cheque payments.