Central relief from credit crunch to states, corporates
Tribune News Service
New Delhi, April 6
The Government is considering further relaxations to cash-strapped state governments as well as 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 Reserve Bank of India (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 way and means advance 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 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 abuse but also ensure 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 per cent of their borrowing ceiling for the current fiscal. Consultations on this issue are being held between the states and RBI in this regard.
