Banks want RBI to extend recast window till March 31, 2021

Indian Banks Association (IBA) has made a representation to the Reserve Bank of India (RBI) to extend the restructuring window outlined by the KV Kamath committee by another three months to March 31, 2021, two people familiar with the development said. The window to seek restructuring is set to lapse on December 31.

Bankers have requested the regulator that given the case in the Supreme Court leading to a prolonged moratorium, they haven’t been able to assess borrower cash flows. Also, with borrowers pinning hopes on the Supreme Court verdict in the loan moratorium case, several customers have sought more time to submit recast requests.

“A request has been made to the RBI to extend the recast window by another three months, bank books are very opaque currently since several borrowers are sitting on the fence and awaiting a positive verdict from the apex court,” said a banker in the know of the IBA’s representation.



The IBA co-ordination committee set up to study recast progress of Covid-related cases had held regular feedback meetings with Kamath committee members and expressed the need to extend timelines.

“Borrowers are confused on whether to go for restructuring or wait for the SC verdict. Even if the SC verdict comes soon, a lot of time has been wasted,” said another official in the know. “Bankers, on the other hand, are facing the challenge to keep these stressed assets standard, which is the main ask of the recast framework.”

The Supreme Court has been hearing petitions of borrowers seeking the waiver of interest on loans during the moratorium period. The court has said no account should be declared a nonperforming asset (NPA) if hadn’t been put into that category by August 31 until further orders.

To give relief to borrowers affected by the pandemic, the regulator set up a committee under veteran banker KV Kamath to define one-time recast framework. The Kamath committee defined recast thresholds for 26 stressed sectors. Banks are required to make 10% provisioning on all loans recast.

ET recently reported that bankers had communicated to the Kamath committee that they don’t expect more than seven to eight large-value cases with debt of more than Rs 1,500 crore each to be recast under the Covid restructuring scheme. There were approximately 387 accounts with an exposure of more than Rs 1,500 crore that were standard at the end of March.

A recent Crisil study said as many as 99% of companies (excluding MSMEs) rated by them are unlikely to opt for the one-time-debt-restructuring (OTDR) in a preliminary analysis of 3,523 such non-MSME companies indicates. This is largely on the back of improving business sentiment and gradual opening up of the economy.