The Retailers Association of India (RAI) on Thursday welcomed the Reserve Bank of India’s decision to allow the one-time restructuring loans, stating that the retail industry has been facing severe stress because of the pandemic.
Kumar Rajagopalan, CEO, Retailers Association of India (RAI) said, “Permitting loan restructuring will support the retail industry that has witnessed significant disruption over the past few months. The current retail sales have been around 40% of last year. Loan restructuring will help retail get back on its feet to fight the economic crisis that has fallen on this sector.”
RAI said that for the last five months, they have been making submissions to the Centre, state governments and the RBI regarding the financial situation of retailers, and that fortnightly survey conducted by the association showed that the first half of July 2020 had a sales growth of 15% year-on-year.
Retailers have had loss of revenue and businesses have closed down, because of which some some retailers were unable to pay salaries to their staff, and the reluctance of banks to come to their aid was “unfortunate”, RAI said.
“Banks have made huge investments in the retail sector, and if the sector struggles to get back on its feet, a significant portion of that investment could turn into non-performing assets,” RAI said.
According to RAI, over half the retailers it surveyed did not get a moratorium for EMIs due between March 1 and March 31. Additionally, it said that only 54% of their respondents asked for additional working capital, which only 15% received. PSU banks rejected around 28% of all loan requests, while private banks sanctioned less than 10%, it said.
The Reserve Bank on Thursday permitted banks to go for one-time restructuring of loans that are facing stress due to the COVID-19 crisis with a view to mitigating risks to financial stability. The restructuring will be allowed as per the prudential framework issued on June 7, 2019, RBI Governor Shaktikanta Das said.
RBI also announced setting up of an expert committee headed by veteran banker K V Kamath which will give recommendations on various parameters to be factored into each resolution plan for corporate loans.