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RBI extends loan repayment window to 90 days

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In further relief to people hit by demonetisation, the Reserve Bank of India (RBI) on Wednesday gave borrowers another 30 days over and above 60 days for repayment of housing, car, farm and other loans worth up to Rs1 crore.
“On a review, it has been decided to provide 30 days, in addition to the 60 days provided (on 21 November),” the RBI said in a notification.
So, borrowers together get 90 days breather from getting the account classified under non-performing asset (NPA) category. The above dispensation will apply to dues payable between 1 November and 31 December 2016, the notification said.
Following the surprise announcement made by Prime Minister Narendra Modi on 8 November to scrap Rs500 and Rs1,000 notes, the economy witnessed cash crunch leading to slowdown in businesses. As a result, the repayment capacity of the borrowers were impacted and there was fear of loan default rising.
The demonetisation of higher value currency notes has affected normal banking activities including clearing of cheques. Besides, borrowers are unable to get payments from their creditors due to various restrictions including cash withdrawal limit of Rs24,000 per week, limiting their options to repay their dues.
According to the RBI notification, running working capital accounts or crop loans with the sanctioned limit of Rs1 crore or less would be eligible for this benefit. Besides, it said, “Term loans for business purposes, secured or otherwise, the original sanctioned amount whereof is Rs1 crore or less, on the books of any bank or any non banking financial company (NBFC), including NBFC (MFI). This shall include agriculture loans.”
The apex bank further said that all regulated entities are permitted to defer the downgrade of an account that was standard as on 1 November, but would have become NPA for any reason between November and December by 90 days from the date of such downgrade. The additional time of 90 days will only apply to defer the classification of an existing standard asset as sub-standard and not for delaying the migration of an account across sub-categories of NPA.
Dues payable after 1 January 2017 will be covered by the instructions for the respective entities.
Last month, the RBI had provided additional 60 days for repayment of loans worth up to Rs1 crore. Separately, the central bank came out with this special dispensation for farm loan earlier this week.
Mint New Delhi,29th December 2016

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