State Bank of India Chairman Rajnish Kumar on Thursday said he hopes for lessser number of requests for one-time restructuring of loans from corporates. Earlier this month, RBI allowed one-time restructuring of both corporate and retail loans that are being affected by the COVID-19 related stress.
"Currently, for corporates, I can say that because of a lot of deleveraging and resolution, clean up has already happened and a lot of accounts got dealt with under the existing June 7 framework of RBI. As of now, there are not many requests (restructuring) and I hope that there are not many requests coming forward," Kumar said. Speaking at the 'Unlock BFSI 2.0' event organised by Business Standard newspaper, he said there will be some requests for restructuring from the personal loan segment and "we are readying ourselves for dealing with the volumes as far as the P-segment (personal loan segment) is concerned".
Restructuring benefit can be availed by those whose account was standard on March 1 and defaults should not be over 30 days. A committee headed by K V Kamath has been set up to give recommendations on various parameters to be factored into each resolution plan for corporate loans. The five-member panel's recommendations will be out by September 6.
Kumar said banks would look at all requests for restructuring on a case-to-case basis and will act according to whatever is permitted by regulation. He expects to have a clear idea on the restructuring, which has been sought by the personal segment, MSMEs and the corporates, by September-end.
HDFC Bank's outgoing Managing Director Aditya Puri, who was also present at the event, said the moratorium on repayment of term loans was a good idea as cash flow has been affected. He said there could be some uptick in NPAs but it would not be very high post lifting of the moratorium.
"As far as HDFC Bank is concerned, we ran our algorithm and the provision that we made in the last two quarters and what we will do take now as well, assumes that there is no moratorium. We want to be conservative and have the profit, so, we have provided for it. "My legacy will be a COVID-proof balance sheet for HDFC Bank. We are very comfortable," Puri, who will retire on October 20 after leading the bank for the last 25 years, said.
Speaking at an earlier session at the event, Punjab National Bank's MD and CEO S S Mallikarjuna Rao said his bank is open to restructure stressed accounts in the aviation, realty and hospitality sectors that are hit the hardest. Union Bank of India's chief Rajkiran Rai G said the real quantum of the stressed accounts for restructuring will come by September-October.
IDBI Bank head Rakesh Sharma expects 4-5 per cent of accounts to go for restructuring and in the worst case scenario, 6-8 per cent may opt for debt recast. When asked whether there was pressure on giving credit under the Rs 3 lakh crore credit guarantee scheme for MSMEs, Rajnish Kumar categorically said there was no question of pressure from the government as the scheme was designed after a lot of consultation with the Department of Financial Services (DFS) and commercial banks.
"The scheme design was such that it takes care of the MSME sector because there is a temporary disruption of cash flow and liquidity support is required. If you look at the entire package, this is one of the most successful," he said. Puri said HDFC Bank was one of the biggest supporters of the credit guarantee scheme and was the most aggressive participant.
According to Kumar, consolidation in the banking sector can enhance banks' ability to fund large projects. He, however, said for financial inclusion or providing services across geographies and consumer segment, there is a need for many players.
"We need large banks and we need small niche players so that all the needs of the economy can be satisfied and served," he said. To a question on the issue of the waiver of interest on deferred payments of instalments for loans during the moratorium period announced due to the coronavirus lockdown, Puri said no one is asking banks to waive interest.
"Bank ko toh koi nahi bol raha hai waive karne ko. Banks se toh contractual obligation, tum ko dena padega. (Banks are not being asked to waive interest. Customers are liable to pay interest to banks as there is a contractual obligation). "Mera dandha hai (This is my business). I am not a charitable institution and I am responsible to multiple people,” Puri said. On Wednesday, the Supreme Court took note of the Centre's alleged inaction and asked it to clarify its stand within a week on the waiver of interest for deferred payments of instalments for loans during the moratorium period announced due to the coronavirus lockdown.
A bench headed by Justice Ashok Bhushan said the Centre had not made its stand clear on the issue despite the fact that ample powers were available with it under the Disaster Management Act and was "hiding behind the RBI".
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