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Loan Moratorium: Kamath panel identifies 26 sectors for loan recast

As a relief measure during the Covid-19 nationwide lockdown, the Reserve Bank had announced a three-month moratorium on loan repayments in the month of March which was extended by another three months.

Loan Moratorium: Kamath panel identifies 26 sectors for loan recast
Loan Moratorium: Kamath panel identifies 26 sectors for loan recast
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Published : Sep 9, 2020, 3:36 PM IST

New Delhi: An expert committee has recommended loan restructuring and extension of loan moratorium for more than two dozen sectors severely impacted by the Covid-19 global pandemic that has killed over 72,000 people in the country and also decimated nearly one quarter of the country’s gross domestic production in the first three-months (April-June period) of this fiscal.

As a relief measure during the Covid-19 nationwide lockdown, the Reserve Bank had announced a three-month moratorium on loan repayments in the month of March which was extended by another three months. The six month general loan moratorium lapsed at the end of last month.

However, the possibility of yet another extension had deeply divided the banking community and industry with conflicting demands, forcing the Reserve Bank to form a committee under the chairmanship of KV Kamath, former MD and CEO of the ICICI Bank who later headed Shanghai based multilateral lending body New Development Bank formed by the BRICS countries.

In its report, the KV Kamath committee identified 26 sectors severely hit by the adverse economic impact of Covid-19 global pandemic which is expected to cause a loss of $9 trillion to the global economy this year.

According to the committee, which submitted its report to the Reserve Bank on Tuesday, the Covid-19 pandemic has affected the best of companies in the country, which were otherwise viable under pre-Covid-19 scenario.

Read More: Low-wage workers tap into retirement savings to deal with Covid crisis

The committee estimated that nearly 72% of the total advances of the banking sector were stressed due to the Covid-19 global pandemic. It means loans worth Rs 37.72 lakh crore of total loan book of Rs 52.77 lakh crore were hit by the adverse economic impact of Sars-CoV-2 virus.

In its report, the Kamath committee estimated that NBFC, Power, Steel and Real Estate sectors alone accounted for stressed loans worth Rs 18.62 lakh crores, which is nearly one third of total advances.

The committee also found that sectors like Retail, Wholesale Trade, Roads, Textile and Engineering goods were also severely hit, accounting for stressed loans worth Rs 10.43 lakh crore, or 20% of the total advances.

Kamath Panel suggests 26 sectors for loan recast

In its report, KV Kamath committee suggested that 26 sectors should be considered for the resolution process.

These sectors are: Power, Construction, Iron & Steel Manufacturing, Roads, Real Estate, Trading-Wholesale, Textiles, Chemicals, Consumer Durables/FMCG, Non-ferrous Metals, Pharmaceuticals Manufacturing, Logistics, Gems and Jewellery, Cement, Auto Components, Hotel, Restaurants, Tourism, Mining, Plastic Products Manufacturing, Automobile Manufacturing, Auto Dealership, Aviation, Sugar, Port & Port services, Shipping, Building Materials, and Corporate Retail Outlets.

(Article by Krishnanand Tripathi)

New Delhi: An expert committee has recommended loan restructuring and extension of loan moratorium for more than two dozen sectors severely impacted by the Covid-19 global pandemic that has killed over 72,000 people in the country and also decimated nearly one quarter of the country’s gross domestic production in the first three-months (April-June period) of this fiscal.

As a relief measure during the Covid-19 nationwide lockdown, the Reserve Bank had announced a three-month moratorium on loan repayments in the month of March which was extended by another three months. The six month general loan moratorium lapsed at the end of last month.

However, the possibility of yet another extension had deeply divided the banking community and industry with conflicting demands, forcing the Reserve Bank to form a committee under the chairmanship of KV Kamath, former MD and CEO of the ICICI Bank who later headed Shanghai based multilateral lending body New Development Bank formed by the BRICS countries.

In its report, the KV Kamath committee identified 26 sectors severely hit by the adverse economic impact of Covid-19 global pandemic which is expected to cause a loss of $9 trillion to the global economy this year.

According to the committee, which submitted its report to the Reserve Bank on Tuesday, the Covid-19 pandemic has affected the best of companies in the country, which were otherwise viable under pre-Covid-19 scenario.

Read More: Low-wage workers tap into retirement savings to deal with Covid crisis

The committee estimated that nearly 72% of the total advances of the banking sector were stressed due to the Covid-19 global pandemic. It means loans worth Rs 37.72 lakh crore of total loan book of Rs 52.77 lakh crore were hit by the adverse economic impact of Sars-CoV-2 virus.

In its report, the Kamath committee estimated that NBFC, Power, Steel and Real Estate sectors alone accounted for stressed loans worth Rs 18.62 lakh crores, which is nearly one third of total advances.

The committee also found that sectors like Retail, Wholesale Trade, Roads, Textile and Engineering goods were also severely hit, accounting for stressed loans worth Rs 10.43 lakh crore, or 20% of the total advances.

Kamath Panel suggests 26 sectors for loan recast

In its report, KV Kamath committee suggested that 26 sectors should be considered for the resolution process.

These sectors are: Power, Construction, Iron & Steel Manufacturing, Roads, Real Estate, Trading-Wholesale, Textiles, Chemicals, Consumer Durables/FMCG, Non-ferrous Metals, Pharmaceuticals Manufacturing, Logistics, Gems and Jewellery, Cement, Auto Components, Hotel, Restaurants, Tourism, Mining, Plastic Products Manufacturing, Automobile Manufacturing, Auto Dealership, Aviation, Sugar, Port & Port services, Shipping, Building Materials, and Corporate Retail Outlets.

(Article by Krishnanand Tripathi)

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