#restructuring
#loanrestructuring
Immediately after my webinar on OTR, I got a call from one of the businessmen. His Loan is standard, and he is finding it difficult to manage all four business pockets at the same time 1) Loan repayment 2) Tax payment 3) Overheads 4) Operating Expenses, out of current level of cash inflows. Cashflows Cycle will take some time to return. He wants exact relaxation from payment of principal (for all his term/ business loans) part of instalment for next 6-9 months with or without overall extension of remaining tenure and that too without going into OTR scheme proposed by RBI which will require long drawn processes and escrow operations of accounts amongst all the lenders.
I paused for a minute and could crystallise, on possibilities of discussion with banks (on a sperate – separate basis) on following:
Extending principal part of EMI by 6-12 months, keeping in remining tenure as it is and interest being paid on monthly basis. Will it be it be restructuring and will it attract sub standard classification of loan account.
Extending principal part of EMI by 6-12 months, extending remining tenure by same period of 6-12 months and interest being paid on monthly basis. Will it be it be restructuring and will it attract substandard classification of loan account. In home loan extension of period is doable. Will it be different for such term loan business loan.
Have talked to many bankers on above. Almost of all of them agree that Accounts can be restructured without being classified as Sub Standard. WHAT A RELIEF, IT CAN BE..………TO ALL SUCH BUSINESSES, WANTING THIS KIND OF RELAXATION. Any correction is welcome but supported by RBI/Bank’s Guidelines only. The idea is to keep evolving for solutions.
Restructuring in pre-covid period has been perceived by most of the bankers as synonymous to substandard classifications, while as actually it may not be so. Covid induced RESTRUCTURING, is not a bad word at all. Bankers are actively considering the need to restructure mind set, vis a vis RESTRUCTURING in overall banking eco system. Many of extant guidelines are already of help and if required policies for internal restructuring can be modified both at RBI/ individual bank levels. What is the big deal in it. Ground level banking relationship needs a lot of training / coaching by senior management on this “RESTRUCTURING”.
What any business, in impacted economy sector/segment, needs the most, during current COVID scenario, is the TIME. 6-12 months’ time relaxation on different repayment of loans can come as great rescue, as it will help businesses, churning their operating cycle faster than other wise possible. We all need to contribute
CA SUNIL K PANDEY
CA, CMA, IIM C
With over 11 years of experience in banking and corporate finance, Sumit Sharma has worked with global brands like Deloitte, Mahindra World SEZ, and USA-based IT firms, gaining exposure across India, the Middle East, and international markets .His expertise spans financial structuring, process optimization, and tech driven automation, with a strong track record in ERP implementation, cost retaionalization, and corporate finance reforms. He has successfully led debenture issuances backed by land mortgages and drive cross-departmental financial efficiency initiatives.
A member of ICAI and ICSI, with an L.L.B(Professional) from the University of Rajasthan, Jaipur, Sumit Sharma brings a unique blend of finance, law and technology to the table. His Strategic approach to financial transformation and governance has helped busniesses streamline operations and scale effectively.
