Can Loan Restructuring Plan revive World’s ‘Bad-loan hit country’? What Report says?

Can Loan Restructuring Plan revive World’s ‘Bad-loan hit country’? What Report says?

New measures to allow restructuring loans will provide Indian lenders “durability” for cash-strapped businesses, says Chief or Central Bank. He further adds, it will help revive the Indian economy.

With an interview with CNBC Awaaz on Friday, Reserve Bank of India Governor Shaktikanta Das emphasizing on Indian economy said, “On one hand health of banks is very important and on the other hand businesses are under a lot of stress due to COVID.”

He added the plan has replaced the blanket loan moratorium that is scheduled to expire later this month. Emphasizing the moratorium, he marked the lockdown as a “temporary solution” and not a permanent fix.

“We are trying to ensure that such businesses can get some regulatory help via banks on the loans that they have taken. That will help the businesses to revive, jobs will be saved and in turn will help in economic revival,” said Mr. Das.

According to the Governor, the spike in bad loans could be witnessed once the six-month loan repayment freeze ends on Aug 31. However, he added that the banks will have the freedom to extend or provide a new moratorium to borrowers under the new plan.

According to Global Banking Outlook, S&P Global Ratings report, India faces the worst bad-loan ratio among the top 10 world economies marking at 13 percent. Followed by Italy, China, Brazil, and the US at 11%, 10%, 4%, and 4% respectively.

Ensuring the stability of a financial sector with bad debts is setting to increase to a two-decade high. Authorities are considering to support the economy that is hit hard by the outbreak. However, earlier GDP rate of the country stood at 3.1 percent before the pandemic.

“We will win this war against the pandemic,” he said. “I don’t know how much time it will take but we will definitely win this war against COVID.”

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