Give India Inc one-time debt restructuring option for early recovery: Assocham
by IANS | Updated Jun 17, 2020
In a letter to Finance Minister Nirmala Sitharaman dated June 16, Assocham 's Secretary General Deepak Sood said the move will aide in early economic recovery.
The industry body has recommended a number of steps to the FM via this letter.
"With economic activity in many parts of the country still to pick up and its taking time to improve, banks fear further considerable loans may turn bad. Most corporate borrowers are currently having difficulty in raising capital and short of cash as demand for their goods and services have considerably reduced," the letter said.
"This is making it harder for them to repay their loans. With no clear visibility, banks would be required to restructure borrowers' loans in a way that it matches what they can repay."
Besides, Sood called for Working Capital support to meet operational requirement of the industry.
"Reduction in operation has led to squeeze in cash flow. Policy support in form of 10 per cent additional working capital has been formulated, but banks have hardly implemented it and may need additional encouragement to quickly implement it for projects under stress," Sood said in the letter.
"Further, for cash strapped businesses it may be difficult to meet repayment of accumulated interest on working capital facilities over deferment period by March 21 as allowed by RBI and may be allowed to be paid over longer duration or towards end of Project period."
Moreover, Sood said that banks have not fully passed on the benefit of lower RBI repo rate.
"Transmission of Policy Rate Reduction to Reduction of Bank's Lending Rate: Between Dec'18 to May'20 RBI has reduced Repo rate by 250 bps but this has not been transmitted to borrowers. Banks have not been commensurate in reducing their 1 year MCLR," Sood said.
"There is a need is to have seamless transmission of repo rate reduction to reduction of Rate of Interest (RoI)."
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