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Indian banks look to RBI to restructure $40 billion in bad loans to travel and tourism firms

By Victoria Tozer-Pennington Jun 04, 2020 1 mins read

Indian banks look to RBI to restructure $40 billion in bad loans to travel and tourism firms

Indian banks have reached out to the Reserve Bank of India (RBI) to restructure loans worth Rs 3 trillion ($40 billion) given to companies in stressed sectors such as aviation, hospitality and tourism and commercial real estate fearing a rise in non-performing loans from COVID 19.

The breakdown for aviation is not year yet clear but the($40 billion requested accounts for more than 2.5% of the total loans worth Rs 91.53 lakh crore ($1.2 trillion) in the banking system, said a senior executive at State Bank of India, speaking to Reuters.

This comes at a time when the government has also allowed suspension of cases being filed under the Insolvency and Bankruptcy Code, a potent recovery mechanism for banks so far.

Restructuring of loans allows banks to change and relax the terms of a loan when the borrower is facing financial stress which crucial avoids reclassifications these as non-performing. If a loan is classed as non-performing banks have to put aside a minimum of 15% capital as provisions towards it.

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