The Reserve Bank of India’s (RBI’s) decision to allow one-time loan restructuring will help soften the COVID-19 pandemic’s impact on banks’ asset quality, said Crisil Ratings.

Without this, the gross non-performing assets could have touched a two-decade high of 11.5% by the end of this fiscal, but will now likely be considerably below that level, it said.

The RBI’s relaxations under the Prudential Framework on Resolution of Stressed Assets will benefit borrowers in most categories. Besides, this is the first time the restructuring option has been extended to retail borrowers, given that many of them may face challenges in servicing debt owing to salary cuts and job losses.

Micro, small and medium enterprises have also got a three-month extension in the existing restructuring scheme till March 31, 2021.

“The major beneficiaries, though, will be the sub-₹500-crore corporate exposures and retail exposures, which were earlier expected to see the highest increase in NPAs in percentage terms” Crisil Ratings said.

“The loans at risk of slipping into NPAs this fiscal unless restructured by banks is ₹3 lakh crore,” it added.

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