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.
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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.
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