Banks are likely to restructure up to ₹8.4 lakh crore of loans, or 7.7% of the overall system’s credit, under the newly announced recast package, a domestic ratings agency said on Wednesday. More than 60% of this ₹8.4 lakh crore was likely to slip into the non-performing assets (NPAs) category if not for the recast move, and the restructuring would help banks’ bottomlines as the funds needed to be set aside, as provisions, would be lower, India Ratings and Research said. Earlier this month, the RBI had announced a recast package which focussed on a case-by-case approach for restructuring rather than a blanket or sectoral approach. The central bank had also allowed small-value, non-corporate loans to be recast. Unlike the earlier experience post the global financial crisis — when about 90% of the restructuring happened in corporate loans — the non-corporate segment, which includes small businesses, agricultural loans and retail lending, will account for a higher share this time, the agency said. It estimated the total amount of non-corporate loans to be recast at ₹2.1 lakh crore. It further said the non-corporate segment was showing signs of stress even before the start of the pandemic, when things seemed to be normalising in the corporate space.
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