Public sector lender Union Bank of India estimates that 6-7% of its loans (over Rs 36,000 crore) could be restructured under the Reserve Bank of India (RBI) program for borrowers affected by the crisis. Covid-19 pandemic.
Rajkiran Rai G, Managing Director and Managing Director of Union Bank of India, said the bank had conducted an internal exercise. These are rough estimates (6-7%) that could change depending on the parameters that the The KV Kamath committee will strengthen. A clearer picture will emerge after the end of the September quarter.
Restructuring activity will occur through three compartments – corporate, micro, small and medium-sized enterprises (MSMEs) and the retail segment. Only standard advances, including dues up to 30 days, will be eligible for restructuring under the RBI scheme.
Gross advances from the Union Bank of India stood at Rs 6.5 trillion at the end of June. These cover the loan portfolio of Andhra Bank and Corporation Bank, both of which merged with Union Bank on April 1.
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According to India Ratings & Research (Ind-Ra), Indian banks could restructure loans worth 8.4 trillion rupees, or about 7.7% of total credit in March, to manage the financial stress caused by the pandemic.
These loans include business accounts, where Rs 6.3 trillion of credit can be recast, and non-commercial accounts (Rs 2.1 trillion), such as retail, agriculture and MSMEs. The amount to be recast could be higher if restructuring in the non-corporate segment exceeds 1.9% of bank credit, Ind-Ra said.
The RBI has formed a five-member expert panel led by former ICICI Bank Chairman KV Kamath who will make recommendations on required financial parameters to be considered in resolution plans. It will indicate sector-specific reference ranges for these parameters. It will also review Kamath’s resolution plans for aggregate exposure above Rs 1,500 crore.
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Rai said that in the enterprise segment, very few large accounts are likely to be overhauled. Most of the cash flow will come from the mid-sized segment (loan exposure of Rs 100-1,000 crore per customer). MSME accounts will be taken over under the existing regime by the RBI.
As for the retail segment, around 7-8% of the retail loan portfolio may need to be reshuffled. The board has already approved a retail debt restructuring policy. The bank expects the maximum work to be done in September-October, Rai said.