Maintain separate category for Covid-19 moratorium seekers: RBI to banks

Step will help banks, financial institutions separate regular debt restructuring and those availed due to the pandemic

The Reserve Bank of India (RBI) on Friday told banks and financial institutions to make a subhead to report their debt restructuring related to the Covid-19 pandemic.

Banks, non-banking financial companies (NBFC), all India financial institutions (AIFI), and microfinance institutions (MFI) will have a new catalogue called ‘Restructured due to Covid-19’ in their reporting format to credit information companies (CIC).

The RBI has said before those opting for restructuring due to Covid-19-related stress won’t be categorised as bad debt and their credit score won’t be affected. Such carving out in separate heads would help the banks and credit bureaus to separate regular restructuring and those availed due to the pandemic. The latter will therefore continue to enjoy their own credit scores and eligible for future credit in normal terms.  

"Banks/AIFIs/NBFCs should make necessary modification to their systems and commence reporting the above information to CICs within two months from the date of this circular. CICs shall make necessary modifications to their system to reflect the above changes," the RBI said in a notification on its website.

If not for the forbearance, any restructuring done by banks attracts a penalty for the customer in the form of harming the credit score. Banks give preferential rates to their customers based on credit scores, and can also deny fresh credit if the score is impaired.

But that shouldn’t be a concern for people who availed such restructuring due to Covid-19. The last date for seeking such forbearance ended on December 31.