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Mumbai, May 22 () In a major relief to borrowers, the Reserve Bank of India (RBI) on Friday extended the moratorium period for the repayment of loans by another three months till August to help them beat the income disruption caused due to the COVID-19 crisis. In March, the central bank had allowed a three-month moratorium on repayment of all term loans due between March 1, 2020 and May 31, 2020. "In view of the extension of the lockdown and continuing disruptions on account of COVID-19, it has been decided to permit lending institutions to extend the moratorium on term loan instalments by another three months, i.e., from June 1 to August 31, 2020," RBI Governor Shaktikanta Das said. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by another three months, he said. As a result of this moratorium, individuals' equal monthly instalment (EMI) payments of loans taken will not be deducted from their bank accounts, providing much needed liquidity to borrowers whose income has been disrupted due to the lockdown till May 31. The loan EMI payments will restart only once the moratorium time period expires on August 31. For borrowers who would avail the moratorium, EMIs will be extended with interest applicable on outstanding principal amount during the no payment period. On March 27, RBI permitted all commercial banks including regional rural banks, and all-India financial institutions, and non-bank financial companies including housing finance companies and microfinance institutions to allow a moratorium of three months on payment of instalments in respect of all term loans outstanding as on March 1. Besides, the central bank directed the lending institutions to exclude the entire moratorium period from March 1 to August 31 from the calculation of 30-day review period or 180-day resolution period due to the COVID-19 crisis. Under the prudential framework, lending institutions are required to hold an additional provision of 20 per cent in the case of large accounts under default if a resolution plan has not been implemented within 210 days from the date of such default. "Given the continuing challenges to resolution of stressed assets, lending institutions are permitted to exclude the entire moratorium/deferment period from March 1 to August 31 from the calculation of 30-day review period or 180-day resolution period, if the review/resolution period had not expired as on March 1, 2020," he said. In respect of working capital facilities sanctioned in the form of cash credit/overdraft, he said lending institutions are being permitted to allow a deferment of another three months, from June 1 to August 31 in addition to the three months allowed on March 27 on payment of interest in respect of all such facilities outstanding as on March 1. The Governor said, lenders are permitted to convert the accumulated interest on working capital facilities over the deferment period up to August 31 into a funded interest term loan which will be repayable not later than the end of the current financial year. The central bank has also decided to raise the bank's exposure to a group of connected counterparties to 30 per cent of the eligible capital base of the bank to facilitate greater fund flow from the banking sector to corporates. Under the extant guidelines on the large exposures framework, the exposure of a bank to a group of connected counterparties shall not be higher than 25 per cent of the bank's eligible capital base at all times. He said, on account of the COVID-19 pandemic, debt markets and other capital market segments are witnessing heightened uncertainty. As a result, many corporates are finding it difficult to raise funds from the capital market and are predominantly dependent on funding from banks. "With a view to facilitating the flow of resources to corporates, it has been decided, as a one-time measure, to increase a bank's exposure to a group of connected counterparties from 25 per cent to 30 per cent of the eligible capital base of the bank. The increased limit will be applicable up to June 30, 2021," he said. Emphasising that as the moratorium is being provided specifically to enable borrowers to tide over COVID-19 disruptions, Das said, the same will not be treated as changes in terms and conditions of loan agreements due to financial difficulty of the borrowers and, consequently, will not result in asset classification downgrade. In respect of all accounts for which lending institutions decide to grant moratorium, and which were standard as on March 1, the 90-day non-performing asset (NPA) norm will also exclude the extended moratorium period. Consequently, there would be an asset classification standstill for all such accounts during the moratorium period from March 1 to August 31. Thereafter, the normal ageing norms shall apply, he added. DP ANS ANS

Borrowers get another three-month breather as RBI extends moratorium on loans till Aug

Mumbai, Apr 30 () Fitch Ratings on Thursday downgraded the viability ratings (VR) of State Bank of India (SBI), ICICI Bank and Axis Bank to 'bb' from 'bb+' on account of deteriorating operating environment for banks amid the COVID-19 pandemic. The global rating agency also downgraded Bank of Baroda's (BOB) VR by one notch to 'bb-', from 'bb'. The agency affirmed the long-term issuer default ratings (IDR) of SBI and BOB at 'BBB-' and those of ICICI Bank and Axis Bank at 'BB+'. The outlook for all the four banks has been kept as stable. "The rating actions are driven by rapid deterioration in the operating environment for banks in the country following the coronavirus pandemic and measures to contain its spread," the agency said. For SBI and BOB, the VR downgrades reflect the heightened risks that weakening asset quality will pose to their less-than-satisfactory loss-absorption buffers. "We expect SBI's and BOB's financial performances to worsen, although their asset-quality problems may not materialise until the effects of the 90-day regulatory moratorium on impaired loans recognition wear off," it said. The VR downgrades of ICICI Bank and Axis Bank highlight heightened risks to their asset qualities and earnings from the disruption in business and consumer activity, which the rating agency expects to continue well beyond the lockdown in the country. Besides these banks, the rating agency also affirmed IDRs of Punjab National Bank (PNB), Bank of India (BOI) and Canara Bank at 'BBB-', with stable outlooks. The viability rating of PNB has been affirmed at 'b' and that of Canara Bank at 'bb-'. HV RVK

COVID-19: Fitch downgrades viability ratings of SBI, BoB, ICICI, Axis Bank

New Delhi, Jul 6 () Punjab National Bank Managing Director S S Mallikarjuna Rao on Monday expressed hope that the Reserve Bank will unveil by October its loan restructuring mechanism for some sectors severely hit by the COVID-19 pandemic. Rao also said that the normalcy is still too far which is making it difficult to assess the situation of companies in terms of cash-flows. "We have requested RBI to permit restructuring. Bankers together have requested, through Indian Banks' Association (IBA), to RBI that you need to look at a one-time restructuring in all these accounts so that bankers will undertake the restructuring properly by analysing the cash flow. However, the account should not become NPA," he said during a webinar organised by CII. Citing an example of the US Federal Reserve, Rao said, the Fed has decided to directly lend corporates with two years' installment moratorium and one-year interest moratorium, besides offering longer durations for repayment. It, he stressed, indicates normalcy restoration by some of the industries is going to take longer. As per norms, Rao said, an account is treated as an NPA (non-performing asset) if it is restructured and provisions have to me made accordingly. Therefore, banks through IBA have requested the RBI for forbearance with regard to restructuring norms. "I believe in the recent board meeting they (RBI) have discussed. However, things may come out after some time. We can wait and see because as on today still we are unable to assess the cash flow of any unit because they have not come to normalcy. "So probably in the month of September and October you will have a better visibility in understanding about the cash flow, by which time, I am expecting that some decision in this regard could come from RBI," he said. The Reserve Bank in its 583rd board meeting on June 26 discussed current macroeconomic situation and evolving challenges being posed by the COVID-19 pandemic. In February, the RBI decided to extend the benefit of one-time restructuring without an asset classification downgrade to standard accounts of GST-registered micro, small and medium enterprises (MSMEs) that were in default as on January 1, 2020, in line with the Budget announcement. "More than five lakh MSMEs have benefitted from restructuring of debt permitted by the RBI in the last year. The restructuring window was to end on March 31, 2020. The government has asked the RBI to consider extending this window till March 31, 2021," Finance Minister Nirmala Sitharaman had said in the Budget Speech. Last month, the finance minister said the government is in talks with the RBI for a one-time restructuring of loans to help stressed companies. In 2008 also, when the world was hit by the global financial crisis, the RBI had announced a one-time loan restructuring for several sectors to help them tide over the economic woes. However, the benefit was misused by many corporate borrowers and banks, compelling the regulator to tighten the rules in 2015. The RBI also initiated asset quality review in December 2015 to put an end to the concept of evergreening of accounts to keep them standard and avoid provisioning. Subsequently, one-day default norm was introduced and resolution of default cases are now dealt as per the Insolvency and Bankruptcy Code (IBC). DP MKJ MKJ

COVID-19: PNB chief hopeful of RBI allowing one-off loan restructuring by Oct

Kolkata, Jun 18 () State Bank of India (SBI) chairman Rajnish Kumar on Thursday said that there is enough liquidity available in the system and also interest rates have moderated to a large extent. Speaking at a webinar organised by Bharat Chamber of Commerce, Kumar said that both the RBI and the government have taken measures to bring back the economy, derailed by the pandemic, back on track. "The government and the RBI have taken measures to bring back the economy to the path of revival", he said. Kumar said the RBI has been giving calibrated responses quickly and ensured that there is enough liquidity in the system. According to him, interest rates have also moderated to a large extent. He said that government has taken steps to make direct bank transfers, a lot of emphasis on helping the MSMEs and announced reforms in the areas of agriculture, defence and mining for creating a favourable investment climate. "I believe the situation is returning to normal and many businesses are back to normal operating at 70 to 80 per cent capacity. Some of them have also started exports", he said. According to him, the rural economy will play a critical role in the revival process. The aviation, tourism, hospitality, services and construction sectors are the most affected, while agriculture is the least, Kumar said. Regarding the Supreme Court's observation on moratorium on loans that banks are charging 'interest on interest', Kumar said SBI has filed an application for intervention along with IBA. "The matter is sub-judice and better to wait till August", he said. Kumar also said that SBI is not charging higher interest rates for ratings downgrade. He said, "we cannot imagine post-COVID situation at the moment and also don't know when it will come." According to him, SBI's liquidity ratio of 143 per cent is not an indicator of the fact that the bank is not lending. Regarding SBI, he said that the bank has sanctioned loan applications of two lakh MSMEs under the guarantee emergency credit line. The MSMEs are managing this crisis very well, he said, adding that reassessment of working capital is going on. dc RG RG RG

Plenty of liquidity available in the system: SBI chairman

Mumbai, Apr 2 () Crisil on Thursday said India Inc's credit ratio fell to an over three-year low for the second half of FY20, and gave a "negative" outlook for FY21 expecting downgrades to continue outpacing upgrades due to the COVID-19 pandemic. The credit ratio, or the number of companies upgraded to those downgraded, slipped to 0.77 for the September 2019-March 2020 period, down from 1.21 in the preceding six months. However, from a quantum of loans perspective, the debt-rated credit ratio rose to 1.24 from 0.25 in the preceding six months. There is little scope for optimism in FY21, due to the overhang of the COVID-19 crisis, the agency said. Its president Gurpreet Chhatwal said the pandemic has slammed brakes on economic activity and also has the possibility of human suffering, which is unprecedented. It is a black-swan event and we are very early into the crisis, making it difficult to model the economic impact, he said, adding that the agency has done an impact analysis on 35 sectors with a debt outstanding of Rs 23 lakh crore. The rating agency has assumed a lockdown period of up to 2 months and another one month for normalcy to return after that as its base case. Chhatwal said economic activity will begin only in the second quarter. The analysis says that auto dealers, and companies in the gems and jewellery, airlines, real estate and steel sectors do poorly because of leveraged balance sheets and dependence on discretionary spending for survival. For a few sectors like telecom and fast moving consumer goods, the crisis can get turned into an opportunity as well, the analysis said. Its senior director Somasekhar Vemuri said 44 per cent of the rated debt in 15 sectors shows a high degree of resilience to withstand the pressures, while 52 per cent of the debt in 15 sectors is showcases a moderate resilience with a downward bias and five sectors with 4 per cent of the debt have low resilience to confront the crisis. In what can come as a relief, the agency said the non-bank lenders it rates have adequate liquidity to manage repayments for the next two months despite the drying up of repayments by borrowers. On the securitised portfolios sold to other lenders, Crisil said most of the rated pass through certificates can withstand the drop in collections because of the option of moratorium on repayments given by Reserve Bank of India till May 2020. On the asset quality perspective, Vemuri said banks' non-performing loans may go up due to the crisis, but added that it is too difficult to make an estimate of the same right now. Impact on asset quality will differ across asset classes depending on resilience of the underlying borrower segment to lockdown and eventual lifting of the same, the agency said. AA SHW ANSANS

India Inc's credit ratio drops to 3-year low in second half of FY20: Crisil

New Delhi, Mar 6 () The National Stock Exchange (NSE) on Friday put restrictions on Yes Bank shares in various segments, including futures and options.In a rare move, capital-starved Yes Bank was on Thursday placed under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board.The categories placed under restriction include debt, securities lending and borrowing scheme, currency derivatives, commodity derivatives, futures and options, as per notification by NSE."Due to the recent development in Yes Bank it has been decided that no fresh or renewal of bank guarantees and fixed deposit receipt issued by the bank limited will be accepted," it said.The existing benefit provided to members towards Bank Guarantees and Fixed Deposit Receipt issued by Yes Bank in favour of NSE Clearing Ltd, shall also be reduced, it added. "The financial position of Yes Bank has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan and losses and resultant downgrades, triggering invocation of bond covenants by investors and withdrawal of deposits," NSE said in a separate circular.The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank, it added. RUJ ANUANU

NSE puts restrictions on Yes Bank shares

New Delhi, Mar 9 () Two more mutual fund houses, Franklin Templeton MF and Baroda MF, have decided to side-pocket their exposures to Yes Bank bonds following the rating downgrade of troubled private lender's debt instruments.This takes the total number of fund houses side-pocketing or segregating their exposures to Yes Bank bonds to five.Three fund houses -- UTI MF, Nippon India MF and PGIM India MF -- on Friday announced to side-pocket or segregate their exposures to bonds of the private sector lender.The move is aimed at preventing the distressed assets from damaging the returns generated from more liquid and better-performing assets.The development comes after the downgrade of debt instruments of Yes Bank to ''D'', which is below investment grade, by rating agency Icra. Yes Bank on Thursday was put under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board.In a statement, Franklin Templeton MF, which had an exposure of Rs 294 crore to Yes Bank debt, has created segregated portfolios in four of its schemes.The four schemes are Franklin India Debt Hybrid Fund, Franklin India Dynamic Accrual Fund, Franklin India ShortTerm Income Plan and Franklin India Credit Risk Fund.Pursuant to the downgrade of rating of debt instruments of Yes Bank to default category by Icra on March 6, Baroda MF, in a separate statement, said it has proposed to create a segregated portfolio in respect of its two schemes -- Baroda Treasury Advantage Fund and Baroda Credit Risk Fund -- of the private lender with effect from Friday, subject to approval from the board of directors of Baroda Trustee India Pvt Ltd.Overall, mutual fund houses had an exposure to the tune of more than Rs 2,800 crore to Yes Bank bonds at January-end.The RBI, in a notification, on Thursday said the financial position of Yes Bank has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits.The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank, it added.The central bank has appointed former CFO of public sector lender State Bank of India Prashant Kumar as an administrator.In December 2018, regulator Sebi had permitted mutual funds to create segregated portfolios, or side-pocketing, with respect to debt and money market instruments. In case of a credit event that is a credit downgrade, like below investment grade and similar, segregated portfolio may be created.Creation of segregated portfolios is a mechanism to separate distressed, illiquid and hard-to-value assets from other more liquid assets in a portfolio. SPBAL

Mutual funds continue to side-pocket exposures to Yes Bank bonds

Mumbai, May 5 () Global ratings agency S&amp;P on Tuesday said additional financial stimulus is "necessary" in India to fight the COVID-19 pandemic, despite the country's weak fiscal position. The stimulus is necessary to support the vulnerable segments of the society and also to prevent additional structural damage to the economy amid the lockdown which has suddenly stopped the business activity, S&amp;P said in a report. In March, the government announced a Rs 1.7 lakh crore relief package focusing on providing food security to the poor and providing money in their hands to fight COVID-19. Many industry watchers have said the package was too less, while some have backed the Centre for not front-loading the package, saying the longevity of the pandemic is not known. The quantum of a new stimulus package is a highly speculated aspect, with some industry watchers advocating caution and others pushing for more spending given the unprecedented nature of the pandemic. "In our view, the Indian government is likely to introduce additional fiscal stimulus measures, which could be broader in scale relative to efforts so far," the agency, which has a 'BBB-/Stable/A-3' rating on the sovereign, said. It added that apart from the direct fiscal transfers to the affected individuals, government officials have indicated a willingness to use a range of options available in their policy toolbox which may include additional support for the corporate and the financial sector as well. The agency said India's fiscal position has been weak for a long time now and is a major factor constraining sovereign credit rating along with the government debt. "Though the fiscal space is limited owing to the government's already-elevated deficit, additional measures could be necessary to support the vulnerable segments of the society, and to prevent additional structural damage to the economy amid the recent sudden-stop in the business activity," it said. S&amp;P added that India will show a "powerful recovery" in the economy in 2021-22, if it is assumed that the pandemic is contained and there is a significant improvement in the global economic conditions. However, if the damage to India's domestic economy is not sufficiently mitigated, the fallout could weigh on the recovery and result in downward pressures on the sovereign and Indian banks, it warned. The agency said systemic pressures for Indian banks could rise owing to the recently announced extension of the nationwide lockdown to check the COVID-19 spread. It said the Rs 1.7 lakh crore relief package along with liquidity easing moves from the Reserve Bank through the targeted long term repo operations will help temper economic risks. Amid speculation of an extension in the three-month moratorium, it said such a move can help borrowers suffering from temporary liquidity issues. Drawing from the commentary and data from Axis Bank, which announced its results last month, the agency said a fourth of the lender's borrowers by loan quantum opting for loan moratorium suggests that some of the stronger borrowers are also opting to conserve liquidity in these tough times. The agency said it will compare the same numbers with the commentary from other banks to assess Axis Bank, but maintained that its Rs 1,400 crore loss for the March quarter reflects a "rise in systemic risk". As of now, its negative outlook on the lender is reflective of the economic risks for the bank, and the Indian economy at large, remaining high, S&amp;P said. The bank will maintain its strong market position and adequate capitalisation over the next 18 months, it said, warning that a large unanticipated asset quality shock can result in a downgrade of the bank's rating. AA ANUANU

More fiscal stimulus measures necessary in India to fight COVID-19: S&P

New Delhi, Mar 6 () Nippon India Mutual Fund on Friday said it has marked down the value of its investments to zero in bonds issued by troubled private sector lender Yes Bank.In addition, the fund house has imposed a limit of Rs 2 lakh on fresh inflows into the impacted schemes till further notice, Nippon India MF said in a statement.This limit is imposed only on the new applications, switch-ins, systematic transfer plans and systematic investment plans received after March 5, it said.The announcement came hours after Yes Bank was placed under a moratorium, with the Reserve Bank capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board. The central bank's action came after the bank failed to raise capital to address potential loan losses."Perpetual bonds of Yes Bank in the schemes of Nippon India MF have been marked down to zero," the fund house said."While Yes Bank has been marked down to zero, no segregation has been done. Segregation/side pocketing is only allowed on happening of Sebi defined triggers," the fund house spokesperson said. Nippon India Mutual Fund said it will review this decision on regular basis and take appropriate actions as clarity emerges on this matter."A limit on new applications, switch-ins, systematic transfer plans, systematic investment plans will help ensure that once clarity emerges, the interest of existing unitholders has not been significantly diluted in the interim through additional purchase activity while limiting the inconvenience to retail unitholders," the statement said."We continue to remain engaged with Yes Bank and closely monitor the developments in this matter," it added.Schemes such as Nippon India Hybrid Bond Fund, Nippon India Credit Risk Fund, Nippon India Equity Hybrid Fund, Nippon India Strategic Debt Fund, Nippon India Retirement Fund- Wealth Creation and Nippon India Equity Savings Fund invested in perpetual bonds of the bank.Earlier, many asset management companies have asked their clients, who have bank accounts with the troubled lender, to furnish details of alternate accounts for receiving redemption payouts.The RBI, in a notification, on Thursday said the financial position of Yes Bank has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits.The bank has also experienced serious governance issues and practices in recent years which have led to steady decline of the bank, it added.The central bank has appointed SBI's former CFO Prashant Kumar as an administrator. SP ANUANU

Nippon India Mutual Fund marks down its investment in Yes Bank to zero

(Eds: Adding BSE circular) New Delhi, Mar 6 () Leading stock exchanges BSE and NSE on Friday decided to drop Yes Bank from Futures and Options segment from May 29. The existing Futures and Options contracts across all expiries will expire on May 28. The development came after Yes Bank on Thursday was put under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month and superseding its board. In similar-worded circulars, the exchanges said," the existing Futures and Options contracts, across all expiries shall expire on May 28, 2020. No Futures and Options contracts shall be available in Yes Bank for trading in equity derivatives segment from May 29, 2020 onwards". Derivatives markets or F&amp;O segment reflect expectation of spot prices in the future, and current price bands or circuit filters are generally not applied on them. At present, there are over 200 stocks in F&amp;O segment. Further, the bourses said due to the recent development in Yes Bank it has been decided that no fresh or renewal of bank guarantees and fixed deposit receipt issued by the private lender will be accepted as collateral. The existing benefit provided to members towards bank guarantees and fixed deposit receipts issued by Yes Bank in favour of their respective clearing corporations will be reduced. "Further, haircut in respect of shares of Yes Bank provided as collaterals shall be revised to 100 per cent with effect from begin day of March 6, 2020," the exchanges said. The RBI, in a notification, on Thursday said the financial position of Yes Bank has undergone a steady decline largely due to inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering invocation of bond covenants by investors, and withdrawal of deposits. The bank has also experienced serious governance issues and practices in the recent years which have led to steady decline of the bank, it added. The central bank has appointed former CFO of public sector lender State Bank of India Prashant Kumar as an administrator. RUJ SP ANUANU

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