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Finance Ministry in talks with RBI on loan restructuring

The Finance Ministry is in talks with the Reserve Bank of India (RBI) on loan restructuring and extending the loan moratorium for the Hospitality sector.

The RBI had earlier announced a three-month loan moratorium in March, which was later extended by another three months till August 31. It was said that the borrowers who opted for loan moratorium could defer the payment of interest and principal component of the loan during this period.

However, there has been demand from the Hospitality sector to further extend the moratorium period. The Hospitality sector has been worst hit due to the Coronavirus pandemic.

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According to the Hotel Association of India (HAI), the pandemic has destroyed more than 90 per cent of demand in the tourism and hospitality sectors, which has been employing nearly 45 million people.

On the other side, the bankers are against the idea of extending the loan moratorium period. Recently, HDFC Chairman Deepak Parekh had urged the RBI Governor Shaktikanta Das not to extend the moratorium period of loans. He had said that many companies were taking advantage of such a facility, thereby hurting the financial sector, especially non-banking.

The Finance Minister Nirmala Sitharaman had said that they are actively engaged with RBI with a focus on loan restructuring while addressing FICCI’s National Executive Committee Meeting.

loan restructuring

She had also emphasized that the banks could not refuse credit to micro, small, and medium enterprises (MSMEs) covered under the Emergency Credit Guarantee Scheme, announced by the Government.

As of July 23, Rs 1.3 trillion has been sanctioned to MSMEs under this scheme. Out of which, Rs 82,065 crore has already been disbursed.

On the issue of reducing the Goods and Services Tax (GST) rates on healthcare and other products, the Finance Minister said that the decision will be taken by the GST Council.

She also stated that the Finance Ministry is working on the creation of the Development Finance Institution (DFI) to handle emerging credit requirements of the industry. This was a suggestion given by the Federation of Indian Chambers of Commerce and Industry (FICCI).

Development Finance Institution will be a Government-backed Institution which will help in funding projects that are unable to get loans from commercial lenders.

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