FM to review implementation of resolution framework for COVID-19 related stress in bank loans

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31/08/2020 07:50am

FM to review implementation of resolution framework for COVID-19 related stress in bank loans

New Delhi, Aug 31 (KNN) Union Minister for Finance Nirmala Sitharaman will meet top management of Scheduled Commercial Banks (SCBs) and Non-Banking Financial Companies (NBFCs) on September 3 to review the implementation of the resolution framework for COVID-19 related stress in bank loans.

''The review will focus on enabling businesses and households to avail of the revival framework on the basis of viability, necessary steps like finalising bank policies and identifying borrowers, and discussing issues that require addressing for smooth and speedy implementation, ''a Finance Ministry statement said Sunday.

After the Monetary Policy Committee (MPC) meet on August 21, Reserve Bank of India (RBI) Governor Shaktikanta Das announced the Resolution Framework for COVID-19 related stress.

"RBI formed the "COVID-19-related resolution framework" after taking into consideration financial health of banks as well as depositors. Businesses are in a lot of stress due to COVID-19 and if they fail, it will lead to financial instability. However, if businesses are saved, they will repay loans and, subsequently, save jobs," he said.

"Bank moratorium was a temporary solution to respond to coronavirus lockdown but resolution framework is a permanent solution," he said, adding that resolution has replaced moratorium.

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erram 01/09/2020 9:54 AM

Banks would do all that is required to impress the FM that they are at their best. Second scheme that involved revival and restructure of stressed assets and NPAs between 31.3.2018 and April 2020 is yet to make a beginning. A few roll outs that I saw of Sub-ordinate Debt had no resolution plan with a longitudinal view. While the revival and restructure as per RBI circular 338 of 2016 for such assets required a Committee approach and 55 days, the units under stress would collapse by that time. It is important for the RBI to come out with a simple plan with longitudinal vision for revival. The revived unit must keep growing and even scaling up during the ten year period of sub-ordinate debt period of ten years.

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