Kamath panel won’t look at retail loans restructuring, banks will decide, RBI says
The Print
August 20, 2020
The Reserve Bank of India (RBI) has clarified that retail loans will not be within the purview of the K.V. Kamath committee, which was set up earlier this month to prepare the contours for the one-time loan restructuring scheme.
Banking industry sources told The Print that the RBI issued the clarification in a communication to the committee earlier this week. They (RBI) have modified the terms and conditions by excluding retail; it is only for corporate loans now. It has said personal loans are not covered,” said a source privy to the development.
Following the spread of the Covid-19 pandemic and the nationwide lockdown which impacted economic activity, the RBI in March had allowed banks to extend the benefit of a moratorium on repayment on term loans for both corporate and retail customers for three months, which later extended by three more months.
With the moratorium period ending in August, the banking regulator announced a loan restructuring for both retail and corporate loans. A five-member committee was set up under the chairmanship of K.V. Kamath, former chairman of Infosys and the New Development Bank of the BRICS countries as well as the former non-executive chairman of ICICI Bank, to outline the contours of the debt recast plan.
When the committee was announced, banks were under the impression that the panel would suggest norms for both retail and corporate loans. As a result, bankers felt a need to expedite the process since the moratorium would expire by the end of the month, and customers who were looking to restructure their debt would need to be informed soon.
However, with this clarification, banks and non-banking finance companies will now form their own norms for restructuring retail loans and seek the board’s approval before implementation, as mandated by the banking regulator.
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