Rbi’s new restructuring package needs careful monitoring to prevent misuse
A highlight of the monetary policy announced this morning was a restructuring package that banks can offer stressed borrowers. The package was on the wish list of bankers as the stress the lockdown and attendant events have put on good borrowers can potentially lead to a ballooning of bad loans. Special restructuring packages, which involve a deviation from the normal rules, have a bad reputation in India as they have undermined the banking system.The RBI, this time, has clarified that it has tried to weave learning from prior experience in preparing the package. Some more critical inputs are expected from an expert committee headed by former chief of ICICI Bank, K.V Kamath.
Indian banking hasn’t yet recovered fully from its last cycle of bad loans which were preceded by special dispensations. It’s important that the current effort minimises the possibility that this round of restructuring is not used to help firms that no longer have a viable business model.
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