RBI may allow one-time loan restructuring soon; Anil Singhvi tells investors to keep an eye on banking stocks

In what may come as a much-needed relief to banks, the Reserve Bank of India (RBI) may allow one-time loan restructuring. Though the banking regulator has not been in favour of this move till now, it may give some leeway to the banks amid the coronavirus pandemic. Zee Business Managing Editor Anil Singhvi explains to investors the importance of this step, if the RBI allows it.

Banking terms like ‘restructuring’ and ‘settlement’ have positive connotations as the former is done when there are problems with the structure while the latter applies to a situation where there is a dispute, Anil Singhvi said.

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जल्द वनटाइम लोन रीस्ट्रक्चरिंग की अनुमति दे सकता है RBI...अनिल सिंघवी ने कहा- अगर रिजर्व बैंक ये फैसला लेता है तो ये पॉजिटिव होगा...बोले- बैंकिंग शेयरों पर रखें नजर, बैंकों के लिए बन सकता है अच्छा ट्रिगर#EditorsTake #RBI #Banks #PSUBanks @AnilSinghvi_ pic.twitter.com/kqCMxW5j1u

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If a structure is corrected or a dispute is settled, it will likely have a positive impact, Singhvi said. If the RBI feels that there is a need for restructuring or one-time settlement between banks and corporates, it should go ahead and get this done, he added.

Having a dispute for years is pointless if a loan is due for repayment from the corporate and the project has become a NPA (Non-Performing Asset), Singhvi said. The money that the corporate could otherwise pay gets locked in the dispute as the banks have to settle loans as per the rules and cannot just accept any offer.

It is necessary to find a way to remove the deadlock, the Market Guru said. Finding a mid-way between the lenders and borrowers through one-time settlement could be a way forward, he further said. Relaxing the rules under current circumstances is the need of the hour, Singhvi said.

There are two types of borrowers – one where there is an error in judgement or some unforeseen situation because of which the business turns NPA and the other is where there is a willful default.

In the former case, it is okay if RBI allows the banks to settle the loans. In the latter, the RBI will not allow it.

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The big takeaway for investors is there too. Singhvi asked investors to keep a watch on banking stocks as this could be a trigger for them to rise.