FM Sitharaman says Centre in talks with RBI on one-time restructuring of loans

The banking sector is likely to witness a major spike in NPAs going forward on account of COVID-19, which will impact the cash flows of companies and make the recovery process even more difficult

Finance Minister Nirmala Sitharaman on June 25 said the Centre is in talks with the Reserve Bank of India (RBI) on the subject of one-time restructuring of loans to provide relief to companies that are reeling under stress due to the unprecedented economic fallout from the COVID-19 pandemic.

Sitharaman said the Centre was also looking at why benefits of interest rate reductions were not being passed on to customers, Business Standard reported. The finance minister said at a webinar organised by the Chennai International Centre (CIC) that the proposal for a one-time loan restructuring option was being discussed by the Centre and the RBI.

The banking sector is likely to witness a major spike in non-performing assets (NPAs) going forward on account of the impact of COVID-19 on industries, which will, in turn, impact the cash flows of companies and make the recovery process even more difficult.

This is why banks are pushing for the idea of a one-time loan restructuring option, even as the central bank seems wary. For this very reason, the banking sector, led by the Indian Banks' Association (IBA), was pushing for a 'bad bank' to deal with the problem of non-performing assets.