Companies with poor credit quality resorted to loan restructuring

Mumbai: Very few borrowers have come forward for restructuring of loans under the Resolution Framework-3 framework provided by the Reserve Bank. Of the boroughs that have opted for restructuring, 9% are in Crisil's sub-investment grade rating range.

This was seen in the ratings of about 200 companies conducted by Crisil. Four out of five sub-investment grade companies are in the B or lower rating category, indicating that only companies with poor credit quality are going into restructuring.

In the event of a slowdown in recovery during Corona's proposed third wave, restrictions on economic activity may lead more companies to opt for restructuring, a rating agency report said.

The picture will become clearer when the last date for restructuring application is September 30, 2021.

In May this year, the Reserve Bank announced Resolution Framework-2 for MSMEs and personal loans of up to Rs 2 crore, which has come under strain due to Corona. However, in June, the limit was raised from Rs 2 crore to Rs 20 crore.

The report estimates that very few companies are coming forward for restructuring due to the increase in economic activity. With the second wave of the Corona approaching, economic activity in the country is gaining momentum.

Most of the companies that have come forward to take advantage of the Restructuring-2 scheme are those with low ratings in the hospitality, construction, textile and gems and jewelery sectors.

The recovery of demand in these sectors is constantly uncertain due to the epidemic.