The minister said the government understands the requirements of the hospitality sector on extension of the moratorium or restructuring of loans
NEW DELHI: The government is "actively engaged" with the Reserve Bank of India (RBI) on restructuring of loans for companies that are stressed due to the coronavirus pandemic, finance minister Nirmala Sitharaman said on Friday.
“The focus is on restructuring. Finance ministry is actively engaged with RBI on this. In principle, the idea that there may be a restructuring required, is well taken," Sitharaman said at a FICCI interaction.
Loan restructuring allows modification of terms of a loan to let banks give borrowers more time to repay or reduce the rate of interest.
The minister said the government understands the requirements of the hospitality sector on extension of the moratorium or restructuring of loans. Hospitality, among other sectors, has been badly hit due to the outbreak of covid-19.
The RBI and the finance ministry have announced a slew of measures to support businesses to tide over the covid-19 crisis. However, a sustained rise in covid-19 cases, partial lockdown in some states have continued to put businesses and lenders under pressure, with most of them expecting a second round of stimulus from the government. The RBI is also soon expected to take a call on extension of the moratorium that was allowed till August 31. However, many bankers, including HDFC chairman Deepak Parekh, have opposed proposals for an extension of the loan repayment moratorium.
The minister further said banks cannot refuse loans to small businesses covered under the recently announced emergency credit guarantee lending scheme. “Banks cannot refuse credit to MSMEs covered under emergency credit facility. If refused, such instances must be reported. I will look into it,"
In a meeting with the heads of top private and public sector banks, non-bank lenders over a video conference, Prime Minister Narendra Modi had also asked them to scale up lending across the priority sectors such as micro, small and medium enterprises (MSMEs) and agriculture. “While it was noted that significant progress has been made in most schemes, banks need to be proactive and actively engage with the intended beneficiaries to ensure that the credit support reaches them in a timely manner during this period of crisis," Prime Minister’s Office had said.
Sitharaman also said the ministry is working on setting up of development finance institution (DFI) for infrastructure financing. “The work is going on... What shape it will take, we will know shortly," she said.
On Thursday, Mint reported that the finance ministry had started work on setting up of new DFI -- a government-backed specialized institution to offer funds to borrowers who are unable to get it from commercial lenders -- which is likely to be finalized and set up in the next six months.
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