Loan repayments being deferred for 90 days

Again, the Banks are required to play the crucial role of providing the requisite cushion to the borrowers in Jammu and Kashmir by offering a deferred repayment schedule operative after 90 days of the recommendations of the State Level Bankers Committee came into effect. This is precisely to provide a helping hand to the traders, industrialists, small and medium enterprises, Small Scale Industrial units and the like in Jammu and Kashmir who find themselves hard pressed on account of some disruptions in the equilibrium of the business activities in Jammu and Kashmir. The decision to this effect has been reached at recently in the form of recommendations of the said committee comprising representatives of Banks and top representatives from State Government departments like Finance, Housing and Urban Development , Planning, Industries and Commerce etc, the Reserve Bank of India , State Bank of India and District authorities.
Such a relief intended to be provided to the borrowers of the Banks must be widely welcome, especially in the context of the trade and business currently facing some constraints and pressures which are expected to be hopefully over shortly as the situation is fast improving. At the same time, certain questions too arise which are pertinent to be discussed. What is the status of the interest payable during the period of extension and whether non payment of the principal interest evoking the provisions of levying penal interest too would be refashioned with a view to provide additional succour to the borrowers. Since the provisions of the norms of income recognition and assets classification which are universally enforceable throughout the country, too could be altered for the period under reference, interest component being crucial and hence was deserving a proper review. In case, hypothetically speaking, Reserve Bank of India and the Banking division in the Union Finance Ministry cannot reach at a decision, on grounds of cogent eligibility, to have the norms stopped in Jammu and Kashmir to be operated during the crucial 90 days which decide the health and the status of the Asset concerned, all such accounts which are not at least serviced, could turn non performing and that could wreck havoc with the system as provisioning shall have to be resorted to from out of the Banks’ profits.
We do not opine that such unprecedented relaxation being on cards to genuinely provide relief to the loaners could set an example for future and a trend setter for repetition in cases where as compared to the current position , justifications would be questionable on comparative basis. Banks and their risk management portfolios are bound to bear the brunt and feel strained which could result in two edged pressures for them. One , no repayments including interest payments are expected from the borrowers for three months and two, prospects of sanctioning of fresh advances too would be impacted. That , in simpler words , meant profitability of Banks getting further eroded . Reserve Bank of India which is the ultimate authority to weigh pros and cons of altering the norms of IRAAC temporarily for 90 days for Jammu and Kashmir must naturally take into account the fallout of such intervention in the system. The important aspect of the whole issue being, however, as to how the Bank borrowers could be put on relief without the Banks’ interests getting jeopardised. We know post 1990 massive disturbed conditions in Kashmir, huge portfolio of advances with the Banks especially in the valley turned bad and had later to be ‘adjusted’ under various relaxed and borrower friendly schemes of waivers of entire interest accruable plus penal interest under One Time Settlement (OTS) schemes and other schemes which overall affected the profitability of the Banks.
There are no bones made about the circumstances in which Banks are operating in the state and the SLBC and other forums must leave no stone unturned to provide a helping hand and succour to the trading community, whether in small, retail, tiny, medium and other categories in the State but the question is how at the same time, the commercial and operating interests of the Banks too could be protected. How their regulatory concerns were looked after and protected as a sound Banking System is crucial for the healthy economy of the country including the trading prospects of their constituents, the borrowers, must be pondered over.