Mumbai: RBI’s decision to allow banks to restructure some loans to micro, small and medium enterprises could have a bearing on credit culture. “During last few years, RBI has been doing away with various schemes for asset quality forbearance and hence, regressive from credit culture point of view, given the past experience of the banking sector with restructuring,” rating agency ICRA said in a note on Wednesday. On Tuesday, the central bank allowed lenders to restructure micro small and medium enterprise loans with aggregate exposure of up to Rs 25 crore, provided the borrowing entity is registered under the Goods and Services Tax network, except those exempt from such registration.
According to analysts, given the cash flow issues faced by micro and small units, following demonetisation and GST rollout, such forbearance will help improve the working cycle of these firms, which contribute significantly to economic growth. “The amount of eligible loans that will be restructured is smaller relative to outstanding credit to have any major impact on gross NPAs. Any easing of norms builds an expectation of more forbearance from regulator. This does not incentive timely payments even by some of the good borrowers, just like in case of farm loan waivers,” said a banking analyst with a brokerage firm. Kotak Institutional Equities said it was surprised at the timing of the notification. “Lenders usually step back lending when the early warning indicators suggest rising trends of deterioration. However, the last available data (1QFY19) suggests that lenders have been quite comfortable and growing this portfolio at a healthy pace,” the brokerage house said in a report.
