RBI's decision to allow loan restructuring may hurt credit culture: Fitch

The move has been roundly criticized by most analysts, and many fear the culture of forbearance is back and could lead to more problems in India's struggling banking sector

India's central bank’s decision to allow a one-time restructuring of some loans to small businesses is bound to foster indiscipline among borrowers.

That’s the view of India Ratings and Research Pvt, a Fitch group company, on the relaxation extended to the so-called micro, small and medium enterprises. “This dispensation may encourage some of the MSME borrowers, which are otherwise operating satisfactorily, to opt for the scheme and impair the credit discipline,” according to Karan Gupta, associate director at India Ratings.

The relief to small businesses was Shaktikanta Das’s first big policy move as Reserve Bank of India governor, and surprisingly came a