Banks seek RBI’s Permission to Restructure ₹3 Lakh Crore Loans

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The nationalized banks have recently sought RBI’s Permission to restructure ₹3 Lakh Crore Loans that were announced by the government under the Atmanirbhar Bharat Package. Let us first study the ₹3 Lakh Crore Loans assured by the government.


Case of Collateral-free ₹3 Lakh Crore Loans Scheme

As the COVID-19 Crisis has affected many industries and different sectors, aviation, real estate, and Hospitality sectors are most impacted. Economic conditions are worse in India.

The Government of India had announced the Atmanirbhar Bharat relief package. Under this, a scheme for MSMEs in the form of collateral-free automatic loan up to INR 3-lakh crore has been brought to provide relief to millions of MSMEs affected due to the impact of the COVID-19 lockdown.

The Reserve Bank of India (RBI) has granted a moratorium on loans. However, according to the opinion of Bankers, this may not be sufficient for sectors in aviation, real estate, and Hospitality as it will take them a few quarters to build cash reserves and clear all the payments.


Bankers Appeal to restructure ₹3 lakh Crore loans

To reform the situation, The Indian Lenders plan to restructure loans worth ₹ 3 Lakh Crore. This recast is primarily for the Hospitality, real estate, and aviation sectors by not downgrading their assets in books of the lender.

Banks have told Reserve Bank of India ( RBI) that non-performing assets (NPA) will plunge on their balance sheets without the restructuring relief.

For implying the restructure loans worth ₹ 3 Lakh Crore, Many heads of different state banks of India, raised this subject during the meeting with the Finance Minister of India Nirmala Sitharaman, which was held on May 22.


Reasons to restructure ₹3 lakh Crore loans

A banker tells that they are continuously in contact with RBI to help the worst-hit sector. That’s why the decision to restructure of ₹ 3 Lakh Crore loans will be essential. Also, the different estimates suggest this is the only method that can help India and RBI to boost the economy again.

  • The estimation of banks for exposure is INR 2.3 lakh crore to commercial real estate at the end of April, Rs 45,862 crore to the hospitality sector, and over INR 30,000 crore to aviation companies.
  • Rating agency ICRA has an exclusive forecast suggesting that the aviation industry will require an investment of almost Rs 35,000 crore over the next three years.
  • Rating agency Crisil predicts that India ‘s growth will contract 5% in fiscal 2021 due to the pandemic and lockdown with a 25% contraction the only first quarter of the year.
  • Indian transporters are currently facing their worst crisis ever. Moreover, because of the lockdown, they have been in a no-revenue situation for two months.
  • Despite a minimal commencement of domestic operations earlier last month, bankers suspect airlines won’t be able to pay back the debt, resulting in substantial delays.
  • Many hotels in Hospitality Sectors might shut down permanently.
  • The commercial real estate sector is also facing the collapse of demand. Experts estimate a 25% drop in rentals or purchases of space.

It is good to see different state banks of India collaborating with RBI to restructure ₹3 Lakh Crore loans.  RBI and the Government of India are decision-make₹ That’s why they need to decide with the utmost sincerity and care. Also, one of the heads of the state-run bank believes that these sectors affected during the Covid-19 crisis can be supported more by giving straightforward terms of repayment in restructuring as compared to emergency loans.

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