As the six-month loan moratorium provided for COVID relief ended on 31 August, a total of $115 billion worth of loans are likely to be restructured, an Indian Finance Ministry source has told Sputnik.
The restructured credit will include both individual and corporate loans.
Requesting anonymity, a Finance Ministry official told Sputnik: "Total Loans worth $115 billion will be restructured to provide relief to businesses and individuals amid the ongoing pandemic".
"Out of the total loans that will be restructured, almost $33 billion is corporate debt. The remaining $82 billion worth of loans pertain to various sectors like agriculture, housing, or individual loans", the official added.
The restructuring comes against the backdrop of a warning by the country's apex bank that total bad debt in the banking system may almost double due to the pandemic.
The country’s top bank and banking regulator RBI said in its annual report last month that bad loans in the Indian banking system may go up from 8.5 percent of total loans in March 2019 to 14.5 percent in March 2021.
In March of this year, with the imposition of a nationwide lockdown, the RBI launched a moratorium on payments as relief to borrowers impacted by the pandemic.
According to the RBI's Financial Stability Report, half of the total outstanding loans in the Indian banking system were under moratorium this April.
Though the scheme ended on 31 August, businesses are still finding it tough to operate amid the ongoing pandemic.
Equity research firm, Jefferies India said in a report that 30-60 percent of the loans under moratorium are expected to go in for restructuring.
In fact, in a meeting with public and private banks last week, Indian Finance Minister Nirmala Sitharaman directed the banks to start the process of restructuring the loans by 15 September.
For corporate loans, the RBI-appointed panel led by ace banker K V Karmath has submitted a framework for restructuring. The apex bank is likely to make the structure public soon.