The total debt recast by Indian listed banks, as part of the first round of the Reserve Bank of India’s single debt restructuring program, now stands at over Rs 1 lakh crore.
Much of the restructured debt came from banks’ corporate loan portfolios.
Under the RBI’s first Covid resolution framework, corporate loan accounts restructured at Rs 68,897 crore were worth twice as much as the Rs 28,027 crore of retail loans that were recast.
Overall, Indian banks ‘recast debt stood at around 1% of their gross advances, according to information released alongside banks’ profits.
The total amount restructured under the August 2020 RBI framework is much lower than expected, said Anil Gupta, vice president and head of the financial sector ratings at ICRA.
“Our initial estimate was much higher with a 5-6% restructuring of Covid under the first RBI program, as loans under moratorium were much higher last year, ranging from 20 to 50% depending on lenders.” , did he declare.
A similar view was shared by Pritesh Bumb, senior research analyst at brokerage firm Prabhudas Lilladher.
“The overall restructuring under RBI’s first Covid resolution framework is also weaker than expected as other measures such as the loan moratorium and the emergency lines of credit guarantee program would have helped borrowers to regularize their loans, thus reducing the need for restructuring, ”he said.
In August 2020, the central bank authorized banks to carry out a one-off restructuring of loans to businesses, individuals and small businesses amid fears of an increase in bad debts due to the Covid-19 pandemic.
Public sector banks have restructured more loans than private banks. Total debt reshuffled by public sector banks stood at Rs 68,918 crore, while private banks restructured loans worth Rs 32,597 crore, as of June 30, according to data compiled by BloombergQuint .
Punjab & Sind Bank Ltd., Bank of India, Bank of Maharashtra, Union Bank of India, Bank of Baroda, Indian Overseas Bank and Central Bank of India reported the highest share of restructured loans among public sector banks.
Overall, public sector banks appear to have been more accommodating to borrowers in terms of restructuring loans and absorbing borrower stress, compared to private sector lenders, Gupta said. The total restructuring of public sector lenders, he said, was also higher given the extent of their exposure to borrowers from micro, small and medium enterprises.
“While most banks had closed the restructuring for retail borrowers under the first resolution framework in December 2020, the restructuring for MSMEs and corporate borrowers was closed in the June quarter, resulting in restructuring. more important for business loans, ”Bumb said.
As the second wave of Covid hit the country, the RBI on May 5 reopened the unique restructuring program for retail and small business borrowers with total overdue contributions of up to Rs 25 crore. Under this plan, the restructuring must be invoked before September 30 and implemented within 90 days of the appeal.
While most banks have yet to implement the Covid 2.0 restructuring, some have recognized a potential restructuring that could occur in the first phase. The amount that should be restructured has so far amounted to over Rs 44,000 crore.
While Canara Bank declared Rs 13,234 crore as part of the second restructuring plan, the Punjab National Bank estimated loan exposures at nearly Rs 6,603 crore under restructuring. State Bank of India expected a restructuring of Rs 5,246 crore.
Among private banks, Bandhan Bank has estimated the restructuring loans worth Rs 4,579 crore.
Axis Bank, ICICI Bank, RBL Bank, IDFC First Bank, did not report any borrower accounts for restructuring under the extended framework. Of course, these are only estimates as of June 30. Banks can add restructured loans to the list until September 30.
With restructuring 2.0, total loans restructured by Indian banks could reach over Rs 2 lakh crore by the end of this year, Gupta said.
The trends, however, would remain similar to those of the first round of restructuring, and public sector banks will undertake a larger loan restructuring than private lenders, Gupta said. “But this time around, we could see a bigger restructuring among retail lending, as Covid’s second resolution framework is only open to individual borrowers and small businesses.”