Credit crunch: Relaxation in norms for states, corporates under study
Tribune News Service
New Delhi, April 6
The government is considering further relaxations to cash-strapped state governments and corporates by easing the credit crunch they are suffering from. Both relaxations — increasing the borrowing limit for states and rescheduling the timeline for non-performing assets (NPAs) — are under deliberation within the RBI and the Finance Ministry, as these will come with an onerous set of conditions to prevent their misuse.
Of great interest to state governments is the move to allow them to borrow half of their credit limit for the entire fiscal 2020-21 within the month of April itself. Last week, the RBI hiked the ways and means advances for states without waiting for a committee report while the Finance Ministry released over Rs 17,000 crore to states to help them tide over the economic crunch due to Covid.
The RBI in consultations with the Finance Ministry is working out a detailed table to provide relaxation in the delinquency period for classification of NPAs from the present 90 days. Since the requirements are different due to the varying level of stress on corporates, detailed consultations are required not just to prevent the abuse but also to ensure that the medicine does not worsen the cure.
Basically, the purpose is that a sliding scale ensures corporates take a pick and also that loans are not classified as NPAs after 90 days, as is the current norm. This means that during the relief period, accounts will not be classified as a ‘stressed asset’ either under the Special Mention Accounts (SMA)-1 (overdue between 31 and 60 days) or SMA-2 accounts (loan repayments overdue with delay of 61-90 days).
In the second move, the Centre recognised its inability to pay all the dues to states by way of devolution, goods and services tax compensation by giving them permission to borrow up to 50% of their borrowing ceiling for the current fiscal. Consultations on this issue are being held between the states and RBI in this regard.
Lending helping hand
- Increasing the borrowing limit for states and rescheduling the timeline for NPAs of corporates are under consideration of RBI and Finance Ministry
- The states may be allowed to borrow half of their credit limit for the entire 2020-21 fiscal within April itself
- Last week, the RBI hiked the ways and means advances for states without waiting for a committee report while the Finance Ministry released over Rs 17,000 crore to states to help them tide over the economic crunch due to Covid
