Tag: finance ministry

Govt set to extend tenures of MDs of PNB, UCO, Bank of Maha, BFSI News, ET BFSI

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The finance ministry has moved a file for extension of tenure of three public sector banks’ managing directors, including Punjab National Bank (PNB), according to sources.

Besides, the ministry has also recommended the Department of Personnel and Training (DoPT) for extension of 10 executive directors (EDs) of various public sector banks.

Tenure extension

The three-year term of S S Mallikarjuna Rao, MD and CEO of PNB, is coming to an end on September 18 but the finance ministry has recommended for extension for four months till January 31, 2022, when Rao attains his superannuation age of 60 years.

Atul Kumar Goel’s term as MD and CEO of UCO Bank has been recommended for a two-year extension beyond November 1 this year. A S Rajeev, MD and CEO of Bank of Maharashtra, has been suggested for an extension of two years beyond December 1.

The finance ministry has simultaneously forwarded the name of S L Jain for the appointment of MD and CEO of Indian Bank. The BBB, the headhunter for state-owned banks and financial institutions, had recommended the name of Jain in May after the interview, according to reports.

With regard to EDs, the ministry has recommended names of 10 for extension of their term till their superannuation age or two years, whichever is earlier.

The MD and CEO of a public sector undertaking is given a maximum tenure of five years as a government guidelines.

The ministry sought extension of the executives from the Appointments Committee of Cabinet (ACC). The proposal has been sent to the Dof Personnel and Training for the same after consultation with BBB. The final call for extension will be taken by the ACC.

Board seats vacant

Ten of the 12 public-sector banks, except State Bank of India (SBI) and Bank of Baroda do not have a chairman.

Also, most non-official director posts, which are occupied by professionals from other fields, remain vacant. There are no employee representatives on PSB boards at present.

A large bank can have four executive directors, six non-official directors (of whom up to three could be shareholder directors), a workman director, and an employee director, in addition to a nominee each of government and the RBI, the non-executive chairman and MD & CEO.

With posts vacant, banks are finding it difficult to fill the quorum of their board sub-committee meetings such as risk management, capital raising, audit and even management committee meetings.



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Finance Ministry puts on hold examination for clerical cadre in PSU banks, BFSI News, ET BFSI

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The Finance Ministry on Tuesday directed the Institute of Banking Personnel Selection (IBPS) to put on hold examinations for clerical cadres in public sector banks (PSBs) till a final view is taken on conducting tests in regional languages. In order to look into the demand for holding examinations for clerical cadres in PSBs in local/regional languages, a Committee has been constituted to look into the matter in its entirety, the Finance Ministry said in a statement.

“The Committee will give its recommendations within 15 days. The ongoing process of holding the examination initiated by IBPS will be kept on hold until the recommendations of the Committee are made available,” it said. Recently, IBPS issued an advertisement for holding an examination for recruitment in the clerical cadre of PSBs only in two languages–English and Hindi.

There has been demand particularly from Southern states to include other recognised regional languages for conducting bank clerical cadre. There are 22 languages recognized by the Constitution of India.

The Finance Minister in July 2019 had assured Parliament that the recruitment examination for employment in the Regional rural banks (RRBs) would be conducted in regional languages apart from English and Hindi.

With a view to providing a level-playing field to the local youths for availing employment opportunities, the government in 2019 decided that for recruitment of Office Assistant and Officer Scale I in RRBs, examination will be held in 13 regional languages including Konakani and Kannada, besides Hindi and English.

Since then, examinations for these recruitments are being conducted in regional languages also, it said.



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Nirmala Sitharaman urges G20 nations for aligning recovery strategies with climate concerns, BFSI News, ET BFSI

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Finance Minister Nirmala Sitharaman on Saturday urged G20 nations for aligning economic recovery strategies with climate concerns.

Participating virtually in the Third G20 Finance Ministers and Central Bank Governors (FMCBG) Meeting under the Italian Presidency, Sitharaman shared recent policy responses of Government of India to strengthen the health system and economy, including the efficient application of CoWIN Platform to scale-up vaccination in India.

She highlighted the need for international coordination and cooperation in view of the emerging CoVID-19 variants.

Sitharaman added that this platform has been made freely available to all countries as humanitarian needs outweigh commercial considerations in this extraordinary crisis.

As the co-chair of Framework Working Group of the G20, India along with UK, views digitalization as an agenda that will continue to play a key role in bolstering economic growth, she said.

Regarding the ‘Statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy’, released by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS-IF) on July 1, the G20 Finance Ministers called on the OECD/G20 BEPS-IF to swiftly address the remaining issues.

Sitharaman suggested that further work needs to be done to ensure a fairer, sustainable and inclusive tax system which results in meaningful revenue for developing countries, the Finance Ministry said in a statement.

Earlier this month, India along with other nations joined OECD-G20 framework for global minimum tax. Total 130 countries agreed to an overhaul of global tax norms to ensure that multinational firms pay taxes wherever they operate and at a minimum 15 per cent rate.

Some significant issues including share of profit allocation and scope of subject to tax rules, remain open and need to be addressed. Further, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October.

Speaking on the need for aligning recovery strategies with climate concerns, the Finance Minister called for climate action strategies to be based on the principles of the Paris Agreement and noted the criticality of timely fulfilment of international commitments on climate finance and technology transfer.

The Finance Minister joined other G20 members in welcoming the Report of the G20 High-Level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Response and emphasized on the urgent need to strengthen multilateralism for global health.

The G20 Finance Ministers and Central Bank Governors reaffirmed their resolve to use all available policy tools for as long as required to address the adverse consequences of COVID-19.

Sitharaman appreciated the Italian G20 Presidency for identifying three catalysts of resilient economic recovery from the pandemic as being Digitalization, Climate Action and Sustainable Infrastructure and shared the Indian experience of integrating technology with inclusive service delivery during the pandemic.

The two-day deliberation held on July 9-10 saw discussions on a wide range of issues including global economic risks and health challenges, policies for recovery from the CoVID-19 pandemic, international taxation, sustainable finance and financial sector issues.



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Finance Minister Nirmala Sitharaman offers CoWIN platform to other nations for free, BFSI News, ET BFSI

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Finance Minister Nirmala Sitharaman on Saturday offered to share CoWIN platform with other nations for free, saying that humanitarian needs outweigh commercial benefits.

Participating on the second day of the ongoing G20 Finance Ministers and Central Bank Governors Meeting, Sitharaman shared India’s successful experience in integrating technology with inclusive service delivery during the pandemic, the Finance Ministry said in a series of tweets.

“FM Smt. @nsitharaman shared how #CoWIN application has efficiently supported scale and scope of our vaccination & #India has made this platform freely available to all countries given our firm belief that humanitarian needs outweigh commercial benefits,” a tweet said.

During the meeting, discussions of finance ministers were focused on policies for economic recovery, sustainable finance and International Taxation.

“In policies for recovery session, FM discussed 3 catalysts of economic recovery- #Digitalization #ClimateAction & #SustainableInfrastructure; shared India’s successful experience in integrating technology with inclusive service delivery during the pandemic,” another tweet said.



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Vodafone Idea lenders dial Finance Ministry, want relief for telco, BFSI News, ET BFSI

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A consortium of lenders to Vodafone Idea (Vi) has sought the finance ministry’s intervention to provide some relief to the cash-strapped operator, raising concerns over the telco’s survival amid dwindling cash balances.

The company’s shares plunged as much as 15% on the BSE Thursday, ending 8.8% down at Rs 9.07, after it announced a loss of Rs 7,000 crore in the March quarter on Wednesday.

The lenders’ move comes as the telco has written to the telecom department (DoT), pointing out that its fundraising talks have hit a wall because investors are wary of putting money into a sector hampered by “below-the cost” consumer tariffs. It has further said that it needs a year more to make spectrum payments of Rs 8,292 crore as it’s not generating adequate cash from operations and adjusted gross revenue (AGR) payments are siphoning away liquidity.

Banks remain Jittery

ET has seen a copy of the June 25 letter. “Last week lenders have written to the finance ministry and requested for relief, among which was deferment of spectrum dues,” said a senior bank official aware of the development. “Banks are a worried lot as they fear that no relief from the government could force the company into bankruptcy. They (Vodafone Idea) won’t be in a position to pay their dues.”

Lenders to the telco include IDFC First Bank, Yes Bank, IndusInd Bank, State Bank of India, Punjab National Bank and HDFC Bank, among others. “It is the policy of the bank not to comment upon individual account and its treatment,” an SBI spokesperson said. The other banks didn’t respond to queries.

Vodafone Idea lenders dial Finance Ministry, want relief for telco
Vi’s banks have been jittery for a while, fearing that the telco will fall behind on payments. As of last year, SBI had loaned Rs 11,200 crore to Vi, while PNB had advanced Rs 1,000 crore. Private banks led by IndusInd Bank (Rs 5,000 crore) and ICICI Bank (Rs 1,700 crore) are the other major lenders.

The company posted a loss of Rs 6,985.1 crore for the quarter ended March, wider than the Rs 4,540.8 crore loss in the October-December quarter, hurt by one-time expenses and continuing high depreciation, amortisation and finance costs and subscriber erosion.

Viability risks

The company again warned of risks to viability, which depends on raising funds, successful negotiations with lenders on continued support, refinancing of debt and monetisation of certain assets, among others. In the June 25 letter to DoT secretary Anshu Prakash, Vi flagged that the poor health of the telecom sector has been a deterrent in its efforts to raise Rs 25,000 crore via a mix of debt and equity, a plan it had announced last September.

“We are working on raising new funding for the last six months but the investors are not willing to invest in the company because they believe that unless there is significant improvement in the consumer tariffs, the health of the industry will not recover and they will incur a loss on their investment,” Vi said.



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Finance ministry refutes reports of alleged black money held by Indians in Switzerland, BFSI News, ET BFSI

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NEW DELHI: The Union finance ministry on Saturday said that increase in deposits of Indians in Swiss Banks could be on account of increase in business of Swiss bank branches located in India and raised Inter-bank transactions, rather than due to an increase in alleged black money held by Indians in Switzerland.

It, however said that Swiss Authorities have been requested to provide the relevant facts along with their view on possible reasons for increase or decrease in deposits so that facts could be presented in correct perspective.

Certain reports suggested that that funds of Indians in Swiss Banks have risen to over Rs 20,700 crore (CHF 2.55 billion) at the end of 2020 from Rs 6,625 crore (CHF 899 million) at the end of 2019, reversing a 2-year declining trend. It has also been stated that this is also the highest figure of deposits in the last 13 years.

“Reports allude to the fact that the figures reported are official figures reported by banks to Swiss National Bank (SNB) and do not indicate the quantum of much debated alleged black money held by Indians in Switzerland. Further, these statistics do not include the money that Indians, NRIs or others might have in Swiss banks in the names of third-country entities,” the ministry statement said.

The statement added that the customer deposits have actually fallen from the end of 2019 in a Swiss Banks. The funds held through fiduciaries has also more than halved from end of 2019. The biggest increase is in “Other amounts due from customers”. These are in form of bonds, securities and various other financial instruments, the finance min statement said.

The ministry also ascribed various other reasons for increase in deposits and not possibly on account of the increase of deposits in the Swiss banks out of undeclared incomes of Indian residents. It said that that increase in deposits may be on account if increase in deposits owing to the business of Swiss Bank branches located in India or Increase in Inter- bank transactions between Swiss and Indian Banks. Also, it could be due to capital increase for a subsidiary of a Swiss Company in India or increase in the liabilities connected with the outstanding derivative financial instruments.

The government has issued clarifications in wake of widely held position that it has curbed generation of black money in the economy or unaccounted funds of Indians stashed abroad. The fresh tax agreements reached between India and certain perceived tax havens has introduced certain instruments to prevent round tripping of funds and generation of black money.

It is pertinent to point out that India and Switzerland are signatories to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and both countries have also signed the Multilateral Competent Authority Agreement (MCAA) pursuant to which, the Automatic Exchange of Information (AEOI) is activated between the two countries for sharing of financial account information annually for calendar year 2018 onwards.

Exchanges of Financial Account information in respect of residents of each country have taken place between both countries in 2019 as well as 2020. In view of the existing legal arrangement for exchange of information of financial accounts (which has a significant deterrent effect on tax evasion through undisclosed assets abroad), there does not appear to be any significant possibility of the increase of deposits in the Swiss banks which is out of undeclared incomes of Indian residents, the finance ministry said.



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Centre may front load capital provisioning for PSBs this year, BFSI News, ET BFSI

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New Delhi, As the Central government draws a plan to privatise at least two public sector banks (PSB) this fiscal, it has also decided to front load capitalisation of state-owned banks so that the balance sheets of some of these entities are strengthened ahead of possible sale.

Sources said that PSBs may be provided this year just after their first quarter results before October. This would be a departure from the practice of previous year when bank capitalisation was undertaken late in the year and towards the end of fiscal.

Even in FY21, a substantial portion of capital was released right at end of the fiscal year in March.

“Front loading of capital will help PSBs to strengthen their financials that may again get impacted this year with weak lending and stress coming back on a lot of their credit assets with Covid pandemic continuing to disrupt businesses. This could also help in taking out weak banks out of the PCA (prompt corrective action) framework that would be helpful in their possible privatisation this year,” said an official source on the condition of anonymity.

The Budget 2021-22 has allocated Rs 20,000 crore towards recapitalisation of PSBs to help them consolidate their financial capacity.

Source said that more than two-third of this capital may be provided by the second quarter.

The government had earlier indicated that banks under prompt corrective action (PCA) framework or weaker banks would be kept out of privatisation as it would be difficult to find buyers for them. This would have left three PSBs, Indian Overseas Bank, Central Bank and UCO Bank, out of the government’s disinvestment plan.

But now the thinking is that they could be brought out of PCA as there are visible signs of improvement in some of the key parameters such as profitability and asset quality (in net NPA terms as they have stepped up provisioning) in the last 3-4 quarters. This could allow them to be considered for privatisation.

Provision of capital earlier in the year will give the necessary boost to them.

Finance Minister Nirmala Sitharaman had announced in her Budget speech this year that two state-run banks along with IDBI Bank would be privatised in FY22.

She also said that one general insurance company would be sold off in the current fiscal.

The recapitalisation roadmap is being redrawn for the PSBs in the current fiscal as the institutions are expected to face stress from the pandemic disruptions with fears that asset quality may further weaken like last year.

Also, the changes in valuation norms AT1 bonds has made the instrument less attractive for banks to raise their capital.

SEBI, though has amended the valuation rule of perpetual bonds in line with objections raised by the finance ministry, it still has said that from April 2023 onwards, the residual maturity of AT-1 bonds will become 100 years from the date of issuance of the bond. This will make the most used route of raising capital by banks less attractive.

Sources said that the Finance Ministry has already started a preliminary exercise to determine the capital requirement of banks in wake of limitations on fund raising norms and expected rise in bad assets during the time of the pandemic. Based on the inputs received by banks, additional capital may be provided to them from budgetary resources at the earliest.

On its part, government is strengthening the banking segment by merger and amalgamation of PSBs.

Since 2017, this exercise has resulted in seven large and five smaller PSBs.

The measures (based on bad loans and regional factors) were intended to help manage capital more efficiently. But emerging regulatory needs and pandemic affected businesses continue to pose challenges for banking segment.



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Will the proposed Bad Bank cure India’s banking sector? Here’s how it may shape up

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The earlier FSR released in January 2021 had projected that the gross non-performing assets (GNPAs) of banks may rise to 13.5% by September 2021 in the baseline scenario.

By Nitin Jain

In Feb 2021, RBI announced a structure for a proposed bad bank, “What you call a bad bank is not really that; an ARC-type entity will be set up to take over bad loans from the books of public sector banks and it will try to resolve just like any other ARC,” RBI Governor Shatikanta Das had said.

Proposed Structure of Bad Bank

Though no formal structure has been announced yet, we understand basis news reports, that a National Asset Reconstruction Company Limited (NARCL) is going to be set up to take over NPAs from banks. The Promoters are likely to be power finance companies while the PSU banks will hold the remaining equity stake in the ARC. As per recent news reports, state-owned banks have shortlisted 28 loan accounts to be transferred to the NARCL with a total of Rs 82,500 crore of loans due, and further loans could also be transferred such that the AUM is over Rs 2 lakh crore. The list of borrowers includes big names such as Videocon Oil Ventures Limited (VOVL), Amtek Auto, Reliance Naval, Jaypee Infratech, Castex Technologies, GTL, Visa Steel, Wind World, Lavasa Corporation, Ruchi Worldwide, Consolidated Construction.

Normally the NPA loans at the time of takeover by an ARC are valued around 30-40% of the principal amount. However, as we understand from news sources, in the case of NARCL the loans may be acquired at the current book value. The NARCL would pay 15% in cash and the balance 85% in security receipts or any other proportion as they may decide. Further, the government would provide a guarantee to the security receipts issued by the bad bank. Let’s assume that a bank sells a loan of Rs 100 to NARCL. Now, if the Bank has already made 75% provisions for the loan, then the book value of this loan is Rs 25, and 15% of Rs 25  i.e. Rs 3.75 is cash to be paid to banks. Thus, using these assumptions, for taking over say Rs 2 lakh crore of bad loans, a cash outflow of Rs 7,500 crores and issuance of SRs worth Rs 42,500 crore may be required. (Please note that these assumptions have been taken for the purpose of explaining this concept only and are not indicative or confirmatory in any nature).

Pros and Cons of the Proposed Bad Bank Structure

Pros
-Cleans the balance sheet of the banks.
-Will provide immediate relief to the banking system which will now be facing fresh NPA on account of disruption due to Covid.
-Banks will become capitalized and ready for fresh lending.
-Faster decision making by one body (NARCL) v/s Consortium of banks.
-A secondary market can be created for the SRs which have a sovereign backing, that would provide further liquidity to the banks.

Con
The actual recovery of these loans may be lower than the book value of the loans transferred, thereby could lead to erosion of capital at NARCL over the medium and long term.
-If NARCL will need to take decisive, focused steps to recover these loans, otherwise the process may not be successful.
-The process entails transferring the bad loans at current date, and recovery or resolution to happen in future.
-May lead to aggressive fresh lending by Banks.

Taking control of management of these companies from the Promoters. The RBI had demonstrated effective management of DHFL, by taking over the board and appointing an administrator to manage the company and find a resolution.However, a Bad Bank, or even a network of bad banks, will not make the losses disappear. The losses, or non-performing loans, transferred to a bad bank will still exist. The process may allow better recovery of these loans in future. It will be important for the banks to review their lending policies and put in place a robust risk management system.  Further, it would be crucial to see how NARCL will manage these bad assets. I believe that one will require specialized expertise for recovery of these bad assets such as:

-Interim Crisis Management in these Companies – restructuring, reducing costs, identifying surplus assets and to sell these assets to generate liquidity, and providing transparent and clear communications to all stakeholders.
-Classification of bad loans by sector. The Government already has significant expertise in the Road/ Highways and Power Sector via its Undertakings. However, expertise may need to be built in other sectors via sector experts to facilitate day-to-day management of the operations of the company and to find a viable resolution to preserve value.
-Provisioning policies of NARCL will need to be reviewed such that they are in accordance with the tenor/ maturity of the SRs issued.
-NARCL will need to take a decision as to the route to be taken for recovery from the bad loan. Some potential routes could be: 

    1. Initiating corporate insolvency process on the Company
    2. Engaging an investment banker to pursue mergers and acquisitions transaction for the said asset.
    3. Undertake a compromise or settlement u/s 230 of Companies Act.

Though the ‘Bad Bank’ appears to be a sweet pill for the banking sector to get rid of their immediate problems, it would be a tough task ahead for the proposed NARCL to preserve the tax- payers’ monies over the medium and longer term.

(Nitin Jain is a veteran corporate and investment banker having worked in banks like Standard Chartered Bank and Bank of America. He is a Restructuring Expert and is also an Insolvency Professional registered with IBBI. The views expressed in the above article are the author’s personal views.)

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Haircut under IBC rises to 60% in fiscal 2021, half the closes cases liquidated, BFSI News, ET BFSI

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More than half of the total 4,376 cases under the Insolvency and Bankruptcy Code have been closed with the rest undergoing resolution.

Almost half of the 2,653 cases closed by lenders under IBC in fiscal 2021 have ended in liquidation while only 13 per cent were resolved, according to the quarterly bulletin of the Insolvency and Bankruptcy Board of India.

About 23 per cent of the closed cases are either under review or under appeal.

In 16 per cent of cases, the companies were handed back to the promoters after they cleared part of their dues under Section 12A of the insolvency act.

About 43 per cent of cases admitted so far are filed by the financial creditors while the rest 51 per cent of the admitted cases were initiated by operational creditors.

Haircut rises

In the resolved cases, the haircut, or the loss to banks on their claims, rose to 60 per cent in fiscal 2021, from 55 per cent average in the previous years.

In the March 2021 quarter alone, haircut rose to a whopping 74 per cent of the claims made by the lenders against the defaulters.

About 79 per cent of the ongoing cases till March this year have already passed 270 days since admission. Experts say delay causes erosion in the value of assets and increases chances for liquidation.

The IBC saw an addition of 499 new cases in the last financial year, where the process was suspended due to the Covid pandemic.

Liquidation

About 80% of bankruptcy proceedings involving a default of less than Rs 1 crore were initiated by operational creditors, while 80% of the cases with defaults of over Rs 10 crore were initiated on applications by financial creditors.

Around three-fourths of all bankruptcy proceedings started by operational creditors resulted in the liquidation of the corporate debtor while in case of proceedings initiated by financial creditors that have been concluded, nearly half of the businesses have faced liquidation.

About 74.37% of the corporate insolvency resolution process ending in liquidation (946 out of 1272 for which data are available) were earlier with BIFR and / or defunct.

During the quarter January-March 2021, 149 corporate insolvency resolution process (CIRPs) ended in orders for liquidation, taking the total CIRPs ending in liquidation to 1277, excluding 10 cases where liquidation orders have been set aside by NCLT, NCLAT or courts.

Of these, a final report has been submitted in 240 cases. There are 1,037 ongoing liquidation processes.

During January-March, 2021, 34 more liquidation processes were closed, taking the total number of closures by dissolution, sold as a going concern or compromise or arrangement to 138.

Growing stress

The corporate sector has pitched for a fresh suspension, arguing that there will be additional stress in the wake of the lockdown announced across most states to check the surge in cases, which are still rising by over three lakhs daily.

Industry body Assocham has urged the government to reimpose a moratorium on taking debt-ridden firms to the NCLT under the IBC till December this year following the severe second wave of coronavirus. In a representation to the Finance Ministry, the chamber said that given the increasing pressure on businesses, it would be imperative to extend the NCLT (National Company Law Tribunal) moratorium to ensure that the pandemic “does not wreak havoc” on the economy.



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IBA CEO, BFSI News, ET BFSI

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As the government enhanced the scope of the Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS), banks on Sunday said they have sanctioned Rs 2.54 lakh crore and have room to disburse another Rs 45,000 crore under the plan.

To support the businesses affected by the second wave of COVID-19, the Finance Ministry on Sunday enhanced the scope of ECLGS, including providing concessional loans to hospitals/nursing homes for setting up on-site oxygen generation plants.

The validity of the scheme is extended by a further three months to September 30 or till guarantees for an amount of Rs 3 lakh crore are issued, the ministry said in a statement.

“Of the total kitty (for ECLGS) available, Rs 2.54 lakh crore of loans have already been covered and there is a window available for roughly Rs 45,000 crore. Of the Rs 2.54 lakh crore, Rs 2.40 lakh crore has already been disbursed,” Indian Banks’ Association Chief Executive Officer (CEO) Sunil Mehta told reporters after the ministry’s announcement.

The ministry said, under the ECLGS 4.0, a 100 per cent guarantee cover to loans up to Rs 2 crore will be provided to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants.

The interest rate on these loans has been capped at 7.5 per cent.

“Borrowers who are eligible for restructuring as per the RBI guidelines of May 5, 2021, and had availed loans under ECLGS 1.0 of overall tenure of four years comprising of repayment of interest only during the first 12 months with repayment of principal and interest in 36 months thereafter will now be able to avail a tenure of five years for their ECLGS loan i.e. repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter,” the ministry said.

Also, the new scheme has made a provision of additional ECLGS assistance of up to 10 per cent of the outstanding as of February 29, 2020, to borrowers covered under ECLGS 1.0, in tandem with restructuring as per the RBI guidelines of May 5, 2021.

The government has also removed the current ceiling of Rs 500 crore of loan outstanding for eligibility under ECLGS 3.0, subject to maximum additional ECLGS assistance to each borrower being limited to 40 per cent or Rs 200 crore, whichever is lower.

Loans to the civil aviation sector were also made eligible under ECLGS 3.0, the ministry said.

“We all are aware of the scenario which emerged post resurgence of COVID 2.0. It has actually led to a lot of disruption of economic activity.

“The most vulnerable among them, MSMEs, are in need of support, which has been extended in various forms, more so in the May 5 circular of Reserve Bank of India. Now, the government today announced the modification to the ECGL scheme,” State Bank of India Chairman Dinesh Khara said.

On ECLGS 4.0, Khara said his bank will be in a position to build a book size of about Rs 2,000 crore.

He said for the resolution framework 2.0, announced by the RBI on May 5, all public sector banks have come out with a formulated templated approach for restructuring of loans to individuals, small businesses, MSMEs up to Rs 25 crore.

“The idea behind this is that those who are involved in the implementation of the resolution framework, they should not have any hardship in terms of any implementation,” Khara added.

When asked about the size of the restructuring pool banks are expecting this time, IBA Chairman and Union Bank of India‘s Managing Director and Chief Executive Officer Rajkiran Rai G said it was too early to put a number for potential recasts, as banks are only sending messages to eligible borrowers.

“Last time also we saw that the number of customers opting for this (restructuring) was not that high. So, we need to get some feedback and it is difficult to crystallise a number at this point in time,” Rai said.

Khara said during the previous restructuring scheme, SBI had about 8.5 lakh SME customers who were eligible for restructuring but only 60,000 borrowers availed it.



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