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Sitharaman asks banks to speed up loan disbursals to Covid-hit

Finance Minister Nirmala Sitharaman has asked banks and NBFCs to roll out their loans resolution framework for Covid related stress by September 15.

Sitharaman was speaking during a review meeting with chiefs of banks and NBFCs through video conferencing to review their state of preparedness for implementation of the loans resolution framework.

Hours later the Supreme Court ended the uncertainty on the matter by asking banks not to declare any loan account non-performing asset (NPA) if it was not so on August 31.

While asking the bankers to get their boards to approve the schemes and unveil them by September 15, she indicated that they may lend freely by stating that “Covid-related distress must not impact the lenders’ assessment of creditworthiness” and asking banks to give immediate support to lenders as and when the moratorium on loan repayments was lifted.

Led by Prime Minister Narendra Modi, several meetings have been held with the lenders to urge them to lend freely under three schemes—ECLGS, PCGS 2.0 and Subordinate Debt Scheme—announced as part of the ‘Aatmnirbhar Bharat Abhiyaan’.

Off-take so far has been slow for the Rs 3 lakh crore ECLGS scheme with about half the amount sanctioned so far and one-third disbursed. The Government has extended the deadline for the Rs 45,000 crore PCGS 2.0 but approvals stood at Rs 25,055.5 crore and actual purchases were Rs. 13,318.5 crore.

During her meeting, Sitharaman was to repeatedly underline the need for easier disbursals by advising lenders to try to extend the maximum possible relief to borrowers before the festive season.

The lenders assured that they were ready with their resolution policies and have started the process of identifying and reaching out to eligible borrowers, according to a Finance Ministry news release.

The Ministry said it was also engaging with the RBI to ensure that it assists the banks and NBFCs in the resolution process.

The unveiling of the resolution plans will be followed by a sustained media campaign to create awareness, said the news release. Frequently asked questions (FAQs) of the resolution framework will be uploaded on bank and NBFC websites in Hindi, English and regional languages.

Sitharaman lauded the efforts of banks and NBFCs during the lockdown in effective implementation of the PM Mantri Garib Kalyan Yojana and the Aatmnirbhar Bharat related measures.