MUMBAI: Small and mid-size companies that already had relaxed repayment terms under a 2019 central bank restructuring order have approached the authorities to avail of the latest moratorium benefit, something the lenders want to offer only to their standard accounts.

“Why would a bank give a substandard account a moratorium and delay whatever chances of recovery from the company there are today?” asked a private sector bank executive. “The extended moratorium is now until August and companies have time to pay up until March.”

Still, some SMEs have written to the Finance Ministry and the Reserve Bank of India (RBI), either individually or through industry associations.

“In line with the above Covid-19 package, we have already applied to our bankers for required relief, but in the absence of board-approved policies, no relief was granted to us,” Vandana Global, a Mumbai-based steelmaker, wrote to the ministry and the RBI. An industry body’s Chhattisgarh chapter also made a similar request.

Vandana’s loans were recast in February, in line with RBI’s June, 2019, circular.

“The current environment, undoubtedly, calls for sharper risk management skills among lenders,” said Nirakar Pradhan, Director, Professional Risk Managers’ International Association. “They not only need to provide need-based finance to all industries, including to borrowers with restructured loans, but also to extend non-financial help to navigate through this unprecedented situation.”

RBI’s Covid-19 regulatory package was announced to mitigate the debt-servicing burden of stressed borrowers. But the moratorium has also raised default risks, making lenders more risk averse.

“Companies under restructuring are classified as substandard or NPA accounts,” said a senior public sector bank executive. The RBI norms clearly say that the moratorium is for only standard accounts. “Giving moratorium to accounts under restructuring means throwing good money against bad. No bank would be in favour of that.”

Current regulations give banks 180 days to restructure loans by extending the payment period, reducing interest rates or loan spreads and sanctioning additional credit facilities. If the loan is restructured without a change in promoter, the loan is considered as NPA and requires an immediate 15% provision.

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