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SBI economists pitch for sector-specific loan restructuring package

04 Aug 2020 Evaluate

In order to mitigate stress, State Bank of India’s (SBI’s) economists in its report has pitched for a sector-specific loan restructuring package after the end of the six-month loan repayment moratorium on August 31. They said the moratorium data is not significantly perturbing but hit out against the spate of unplanned and unintelligent lockdown mania in many pockets. They said ‘we believe some sectors/companies may need support like one-time restructuring, sectoral support etc. to tide over the situation.’ However, they added the setbacks are emanating from the continuing limited-area lockdowns and also job losses.

They mentioned the actual number of retail borrowers availing moratorium is lower than the reported one because after the reporting of the data, many borrowers have started repayments. In the corporate segment, companies with adequate balance sheet strength have also opted for a breather and are using the moratorium to conserve cash in the uncertain times. They also said banks need to be adequately capitalised and added that it is imperative that the banking sector should avoid a repeat of the post-2008 crisis experience by being cautious and adopting utmost due diligence.

Last week, Union Finance Minister Nirmala Sitharaman said the government is actively engaged in talks with the Reserve Bank of India (RBI) on loan recasts. She had said ‘the focus is on restructuring. The finance ministry is actively engaged with the RBI on this. In principle, the idea that there may be a restructuring required, is well taken.’

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