Fear Of Losing Ratings, Companies Not Making Loan Restructuring

Fear of losing ratings, companies not making loan restructuring, applications from only 15 companies came to PNB.

On the RBI’s instructions, banks have implemented a policy to provide relief in loan repayment to companies affected by Covid, but very few companies want to take advantage of this facility due to fear of losing ratings.

The reason is that once the restructuring of old debt is expected to affect the ratings of big companies.

PNB, the country’s second-largest bank, has said that it has so far received applications from only 15 companies, with the restructuring of outstanding loans worth Rs 2,000 crore.

According to PNB MD SS Mallikarjun Rao, “We had earlier hoped that restructuring of loans of Rs 40,000 crore would be done.

But now it seems that customers with outstanding loans of more than Rs 20 thousand crores will have to provide this facility.” ‘Under the restructuring process, the bank gives loan customers the opportunity to repay the loan afresh.

Under this, the loan repayment period is extended and sometimes the outstanding interest is also waived. The RBI has implemented the provision to give banks the next two years for companies affected by Covid.

PNB MD says, ‘It has been told from the companies that once restructuring is done, their rating will be affected for two years. Rating agencies do not give ratings as long as the loan restructuring period continues.

However, he believes that applications are coming from small and medium industrial units (MSMEs) to avail more loan repayment facilities.

PNB MD has expressed the possibility of extending the Rs 6,000 crore loan from the MSME sector by December 31, 2020.

Rao’s answer to the question of how Covid has impacted the bank’s lending (NPA) level. It is said that the situation will be better than expected.

18 thousand crore is expected to be recovered from the net amount trapped in the current financial year. The gross NPA is expected to be 14 per cent of the total advances and 5 per cent of the net NPA.

The bank expects loan disbursements to increase by 4 to 6 percent during the current financial year. The growth rate was earlier estimated at 6 to 8 percent.