Finance Minister Nirmala Sitharaman will hold on September 3 a review meeting with top management of scheduled commercial banks and NBFCs on the implementation of the resolution framework for Covid-19 related stress in bank loans.

The review will focus on enabling businesses and households to avail of the revival framework on the basis of viability, necessary steps like finalising bank policies and identifying borrowers, and discussing issues that require addressing for smooth and speedy implementation, an official release said.

The Reserve Bank of India (RBI) had earlier this month announced that it will enable lenders to implement a resolution plan in respect of eligible corporate exposures—without change in ownership—as well as personal loans, while classifying such exposures as standard assets.

The RBI has decided to provide a window to address Covid-19 related stress under its “prudential framework on resolution of stressed assets” (June 7, 2019 circular) that will be subject to specified conditions.

The central bank has already acknowledged that disruptions caused by Covid-19 have led to heightened financial stress for borrowers across the board.

With a spurt in bad loans due to the impact of Covid-19, banks have been toying with an idea to revive two year old proposal of jointly floating an independent asset management company and an alternative investment fund (AIF) to help them with faster resolution of big ticket stressed assets, sources in the banking industry said.

Indications are that this proposal may again come for discussion at the upcoming review meeting, they said.

It may be recalled that a Panel headed by Sunil Mehta (non executive chairman of PNB) had in a July 2018 report to the then Finance Minister Piyush Goyal suggested an AMC/AIF led resolution approach for stressed loans above ₹ 500 crore be adopted.

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