Nirmala Sitharaman to review loan restructuring plan with banks

Politics


India’s Finance Minister Nirmala Sitharaman will meet commercial banks and shadow lenders on Thursday to review implementation of loan restructuring programs following Covid-19 related stress.

The meeting comes days after a debt payment holiday offered by the Reserve Bank of India’s ends. The central bank has since relaxed bad loan classification rules by allowing lenders the power to restructure certain loans. Banks are struggling to accelerate credit growth and are confronting a mounting bad debt pile that’s set to swell to a two-decade high.

“The review will focus on enabling businesses and households,”to take advantage of the plan to revive growth, the finance ministry said in a statement on Sunday. It will also focus on “necessary steps like finalizing bank policies and identifying borrowers, and discussing issues that require addressing for smooth and speedy implementation.”

Indian authorities are taking unprecedented steps to support the country’s financial sector along with efforts to revive the economy from the effects of the coronavirus pandemic. The banking regulator predicts that the capital adequacy ratio for lenders could fall to 11.8% next March — close to the minimum regulatory threshold of 9% — down from 14.6% in March 2020.

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