Money & Banking

‘RBI’s special schemes helped MSMEs, NBFCs tide over liquidity crisis’

Our Bureau Mumbai | Updated on December 30, 2020

Banks have weathered the shock to their balance sheets due to the Covid-19 pandemic well so far. In an interview with BusinessLine, Bank of Maharashtra (BoM) MD and CEO, AS Rajeev, attributed this to a host of factors including timely measures such as the partial credit guarantee scheme and the government guaranteed collateral-free loans; rate cuts, provision of adequate liquidity, and loan moratorium announced by the Reserve Bank of India (RBI). Excerpts:

How tough was 2020 in terms of business?

Banks played a crucial part in stabilising the financial sector and transmitting government stimulus and relief programmes to kick-start the economy. We (BoM) registered year-on-year (YoY) credit growth of 11.60 per cent till Q2 (July-September) end and year-to-date (YTD) credit growth of 9 per cent. Our credit growth was mainly on account of growth in RAM (retail, agriculture and MSME) advances which stood at 25.12 per cent on YoY basis.

Did the pandemic-related measures announced by the government and RBI benefit borrowers and credit off-take?

The government as well as RBI took several steps to improve credit growth with special focus on micro, small and medium enterprise (MSME) sector and NBFC (non-banking finance company) sector (for onward lending). The special schemes - Adhoc Line of Credit and Guaranteed Emergency Credit Line (GECL) scheme have given timely relief to MSME sector/business community by providing them much needed liquidity during the crisis period. Similarly, for the NBFC sector, the partial credit guarantee scheme helped them to tide over liquidity crisis.

Are stressed corporates warming up to restructuring based on the Kamath committee’s criteria?

Initially, when the resolution framework for Covid-19 related stress was announced (on August 6), very few borrowers sought restructuring of credit facilities. We firmly believe that with revival in business activity and availability of additional credit facilities through various other schemes of the government, borrowers are unlikely to go for further restructuring.

What has been your experience on the loan recovery front?

Our recovery during the current fiscal stands at ₹870 crore which is almost 80 per cent of the recovery in the previous year. The pandemic did impact the recovery in Q1 of the FY21, but thereafter it has improved significantly. We are further expecting an additional recovery of ₹500 crore by end FY21.

To aid recovery, our bank launched two new OTS schemes to cover the small borrowers, particularly MSME, taking the present economic conditions in to consideration. The OTS schemes are not only helping the bank to reduce the NPA but also the borrowers to become debt free. With the help of these two new schemes, we are expecting a recovery of ₹400 crore in the current fiscal.

Published on December 30, 2020

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