Banks Loans Restructuring As the Moratorium Gets Over

Banks are likely to restructure up to Rs 8.4 lakh crore of loans, or 7.7 per cent of the overall system's credit, under the newly announced recast package. A high proportion of debt from real estate, airlines, hotels and other consumer discretionary sectors is likely to be restructured, but the largest contribution by quantum will be from infrastructure.. Unlike the earlier experience post the global financial crisis, where nearly 90 per cent of the restructuring happened in the corporate loans, the non-corporate segment, which includes small businesses, agricultural loans and retail lending, will account for a higher. Within the corporate segment, the restructuring may range from Rs 3.3 lakh crore to Rs 6.3 lakh crore, depending on the strategies the banks adopt. About 53 per cent of the pool is at high risk, while 47 per cent is at moderate risk. Banks will start working on the restructuring as soon as the moratorium gets over by the end of this month and provide money accordingly, the agency said, adding the K V Kamath committee will look at advances of over Rs 1,500 crore and even in the case of large loans, the banks will do the groundwork in advance. The overall provisions will be lower by 16-17 per cent to 2.3 per cent for the banking system, because restructuring requires banks to set aside only 10 per cent of the loan outstanding as provisions while for NPAs, it is much higher, it added.