Money & Banking
RBI’s MSME restructuring drive is a dicey move: Report
While the RBI's AQR move was a master stroke to clean bank books and stop the evergreening of stressed loans, the move to restructure MSME loans can have an opposite effect, warns Religare Capital in a report
 
The Reserve Bank of India (RBI) has allowed banks to restructure micro, small and medium enterprises (MSME) loans up to Rs25 crore by devising a corrective action plan (CAP) and opting for the rectification or restructuring and recovery of such stressed accounts. However, this move can have an opposite effect, says a research report from Religare Capital Markets Ltd.
 
"While with this move, the RBI is looking at faster resolution of stress in MSME accounts, we think the impact would be starkly opposite to the central bank’s asset quality review (AQR) drive which aimed at cleaning up bank books. Banks may also witness a surge in MSME restructuring, making it difficult to keep a tab on such loans," the report says.
 
The RBI has issued guidelines for restructuring of MSME accounts with outstanding debt up to Rs25 crore. Banks have been directed to form a committee and devise a corrective action plan (CAP) for all stressed MSME loans, of which accounts with loan limits up to Rs 1mn have to be dealt with at the branch level. Moreover, a stressed MSME with debt in excess of Rs10 lakh can directly apply for a CAP. The committee, within 30 days of convening its first meeting, has to zero in on any one of the following three options to be adopted under CAP:
 
(a) Rectification (fresh loan disbursement to stressed MSME accounts): Banks can grant MSME borrowers additional funding for six months in order to revive the account, while ensuring there is no net present value (NPV) hit on their books. While such accounts would retain their existing classification, fraud cases would fall under the restructured category if rectification along with the six-month funding option is availed more than once during a year. Only in exceptional cases, banks would be allowed to fund the working capital requirement of MSMEs, while in the normal course, an account would directly slip into NPA in case of diversion of funds.
 
(b) Restructuring of existing loans: This applies to standard accounts, special mention accounts or sub-standard accounts with one or more lenders (but not majority of lenders). The moratorium for restructuring would be six months and the restructuring package should outline the milestones to be achieved after this period. No timeline however has been prescribed for attending full normalcy with respect to MSME loans. Also, restructuring can be done only if the borrower is not a wilful defaulter and if majority of creditors approve the same. In addition, MSME promoters would have to extend personal guarantees for restructuring.
 
(c) Recovery: Banks can resort to the recovery of loans if either rectification or restructuring is not found viable, and initiate the process at the earliest.
 
 
Religare Capital says while the RBI's AQR move was a masterstroke to clean bank books and stop the evergreening of stressed loans, the move to restructure MSME loans can have an opposite effect.  It feels, the volume of loans under MSME restructuring will be large compared with corporate debt restructuring (CDR), making it difficult to monitor them. 
 
"We think even standard accounts will opt for this scheme (as done by many corporates earlier) since it eases the interest and debt repayment burden in the near term. Note that lower provisions on stressed loans don’t go down too well with investors. Loans to MSME sector form 12-15% of total system loans. It is difficult to ascertain the exact impact of the RBI’s move, as MSME exposure already classified as NPAs in the books of banks is not known. However, we believe PSBs are likely to offer this scheme to a large number of MSMEs," it concluded.

User

COMMENTS

Ramesh Poapt

11 months ago

kayakalp/vish vaman is on!!!

Vegans may lack vital nutrient intake
New York : Vegans need to guard against neurologic disorders, anemia, reduced bone strength and other health concerns as their diet may lack vital nutrient intake, a new study has warned.
 
The US study points out that some vegans rely heavily on processed foods and may not eat a sufficient variety of fruits, vegetables and whole grains.
 
The findings showed that a whole food, plant-based diet is commendable and a well-planned vegan diet can be adequate to achieve proper nutrition, but requires some education.
 
Researchers recommend that healthcare providers monitor vegan patients for adequate blood levels of vitamin B-12, iron, ferritin, calcium and vitamin D.
 
"We found that some of these nutrients, which can have implications in neurologic disorders, anemia, bone strength and other health concerns, can be deficient in poorly planned vegan diets," said Heather Fields from Mayo Clinic in Arizona. 
 
Vegans consume strict plant-based diet that excludes all animal-derived foods.
 
Contrary to popular belief, "Vegans have not been shown to be deficient in protein intake or in any specific amino acids," Fields said in a paper published in the Journal of the American Osteopathic Association.
 
A retrospective review by Mayo Clinic physicians indicated that vegans should ensure adequate intake of a few nutrients.
 
With the growing popularity of plant-based diets, the researchers compiled a review to monitor and advise vegans to ensure proper nutritional intake. Nutrients of concern are vitamin B-12, iron, calcium, vitamin D, protein and omega-3 fatty acids.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

COMMENTS

Prashant Naikwade

11 months ago

This survey is for vegans in a country like USA or Western countries for whom the definition of vegetarian is very limited; same can not hold true for a contry like India where vegetarianism is part of its culture.

BTW many people looking at my body structure say that I may be a nonveg but I am not.

BJP legislator arrested for maiming horse Shaktiman
Dehradun : BJP Uttarakhand legislator Ganesh Joshi, accused of hitting and severely injuring a police horse which necessitated the amputation of one of its legs, was arrested on Friday, police said.
 
The horse Shaktimaan is alive but his injured hind leg has been amputated, police added.
 
Joshi, who represents Mussoorie, was arrested outside a Patel Nagar hotel following an FIR against him. Senior police officials told IANS that the legislator, who has professed innocence, was being questioned in the case.
 
Dehradun district police chief Sadanand Date said Joshi was responsible for the injury to the hind legs of the horse belonging to mounted police.
 
The Bharatiya Janata Party (BJP), the principal opposition in the state, has hit back by describing the police action as "illegal".
 
Joshi allegedly attacked Shaktimaan during a protest against the Harish Rawat government in Dehradun on Monday.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)