The issue was flagged by Sachin Chaturvedi, director general at policy think tank Research and Information System for Developing Countries (RIS), with Teamlease chairman Manish Sabharwal and Tata Sons chairman N Chandrasekaran too joining in.
The discussions, which were not part of the official agenda, came just a day after finance minister Nirmala Sitharaman publicly stated that the government and the regulator were in a dialogue to allow a one-time loan restructuring for businesses that were viable in the pre-Covid period, but are struggling under the weight of the pandemic.
During the RBI board meeting too, some of the directors pointed out that the pandemic has deeply impacted businesses, who may avoid showing signs of stress at the moment due to the moratorium allowed by the central bank. But with interest adding up, many businesses will find it tough to repay the loans, especially when overall demand is expected to remain weak, with consumers postponing discretionary purchases.
Some of the directors on the RBI board suggested that the current definition, which results in a loan being classified as an NPA if it remains unpaid for 90 days, should be changed to allow for the classification only after 120 or 150 days. “It was suggested that the governor and the monetary policy committee have resorted to the use of unconventional measures to deal with the pandemic and a similar approach is needed on NPA classification as well,” a board member told TOI. RBI governor Shaktikanta Das told the board that the central bank will analyse the issue.
Chandrasekaran is learnt to have suggested that policymakers needed to go the extra mile, while pointing out that there were signs of strong rural demand, which was not just visible in the sale of fertiliser and tractors but also steel, an industry in which his group has a strong presence.
Despite the distress in the economy, a true picture is only expected to emerge after two or three quarters, especially with the RBI-mandated moratorium in place and the government suspending the insolvency and bankruptcy code (IBC). In addition, loans taken during the Covid period will be exempted from NPA tag, thanks to an amendment in IBC. The discussion is, however, on providing relief to loans taken before the lockdown.