RBI asks banks to go easy on small borrowers

KOLKATA: The Reserve Bank of India (RBI) has been telling banks to take recourse to the loan restructuring route instead of terming the accounts, as defaults in case of non-payment of interest for two consecutive terms. This will give much-needed respite to many companies, especially to small and medium entrepreneurs (SMEs) facing the brunt of the economic downturn.

At a meeting of the Bankers��� Club, Kolkata on Monday, RBI deputy governor V Leeladhar is learnt to have urged banks to become more lenient at a time of crisis. ���The deputy governor has told us to consider the option of rescheduling doubtful loan accounts so as to contain the rise in non-performing assets (NPAs),��� a senior Kolkata-based banker, who was present at the meeting, told ET.

The restructured loans can be treated as standard assets in banks��� books. ���Banks should take decisions on
rescheduling loans purely on business merit and if there is fair chance of the concerned company���s revival. That was the essence of Mr Leeladhar���s comments,��� said a senior RBI official.

It is learnt that bankers, on their part, have urged Mr Leeladhar to re-introduce the past due concept for 180 days, instead of 90 days as of now. In the light of the current financial and economic downturn, banks are
expected to see a surge in NPA accounts.

���The banks would, accordingly, be well advised to ensure that their business strategies and decisions are guided by the longer-term perspective of the systemic and macro-economic developments, and are not unduly influenced by the current episode of exceptional events,��� Mr Leeladhar was quoted as saying at the meet. RBI has published a copy of his speech on Tuesday.

���Banks should pay attention to maintaining credit quality. In pursuit of this objective, they should focus on stricter credit appraisals on a sectoral basis, monitor loan to value ratios and calibrate their credit portfolio in tune with
their asset-liability projections,��� the central bank had said in the review report.