RBI’s moratorium to hurt corporate borrowers

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Photo: Reuters 2 min read . Updated: 01 Apr 2020, 09:09 PM IST Gopika Gopakumar SBI says corporate customers who had availed loan will have to pay the 4-month interest by the end of June, failing which they will be classified as Special Mention Account 1SBI is exploring the option of initiating a dialogue with…

Photo: Reuters

2 min read

. Updated: 01 Apr 2020, 09:09 PM IST

Gopika Gopakumar

SBI says corporate customers who had availed loan will have to pay the 4-month interest by the end of June, failing which they will be classified as Special Mention Account 1SBI is exploring the option of initiating a dialogue with Indian Banks’ Association to allow restructuring of working capital loans in the case of businesses which have been affected

MUMBAI :
Reserve Bank of India’s move to allow banks to give a 3-month repayment moratorium to borrowers may stand to hurt corporate customers who have taken working capital loans. Speaking to media on Wednesday, CS Shetty, managing director of State Bank of India said that corporate customers who had availed of these loan will have to pay the 4-month interest by the end of June, failing which they will be classified as SMA 1 or Special Mention Account. SMA 1 are those accounts where repayments have been overdue for between 31 and 60 days

“For corporate customers whose working capital cycle has been impacted, the interest will get bunched up after 3 months. This will need to be repaid at the end of June,” he said.
If the 3-month interest is allowed to be staggered over a period of 12 months like in the case of a funded interest term loan, then it will tantamount to restructuring. SBI is therefore exploring the option of initiating a dialogue with Indian Banks’ Association to allow restructuring of working capital loans in the case of businesses which have been affected. “If business is impacted paying 4 months of interest together might be an issue. So we are thinking about initiating a talk with IBA to seek RBI relief in terms of restructuring these loans,” he added.
Shetty also clarified that in the worst case if these borrowers are unable to pay immediately, then they can pay before 90 days end to avoid the tag of a non-performing account (NPA).
Separately, SBI has also clarified that all the customers looking for settlement on their non-performing accounts can now repay by 30 June. SBI currently runs three schemes for NPA settlement including SBI One Time Settlement (OTS) 2019 (loan amount of Rs20 lakh -Rs50 crore), Rin Samadhan 2019-2020 (loans upto Rs20 lakh) and general compromise (loans above Rs50 crore).
Under the OTS 2019 scheme, the extension will be available only to those customers where the first two instalments have been received within stipulated time of 30 days and 60 days, respectively.
Under the Rin Samadhan scheme, the timeline for receipt of acceptance of OTS proposal along with upfront payment from borrowers has been extended upto June 30, 2020 from the current March 31, 2020, and up to September 30, 2020 for recovery of entire OTS amount.

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