Govt pre-empts J&K’s business crisis, relaxes repayments time

Major outreach to distressed business community across 3 regions

"IRAC norms relaxed from 1 Aug’19 to 1 Mar’20, 90 days addl time"

JAMMU: In a major move aimed at rescuing the distressed business community in Jammu and Kashmir from the default of repayments towards the loans and subsequent declaration as Non-Performing Assests (NPA), the state government on Tuesday rolled out a special dispensation giving extension of repayments by up to 90 additional days, through temporary relaxations in IRAC norms.
This major outreach of the government to the business community of the State is seen as a huge step aimed at addressing the difficulties faced by the borrowers and the banks due to disruption in business in the J&K state since 5 August, when Centre decided to scrap state’s special status and bifurcate it into two Union Territories, followed by severe, several restrictions which continue in Kashmir Valley, even today.
While the situation has by and large remained peaceful since then, the number of curbs on communication, transportation, imposition of section 144, besides shutting down of commercial hubs have disrupted the business activities, more so in Kashmir Valley, even as its impact is being felt in Jammu region too.
Besides announcing the waiver of additional provisioning of 5%, the government also extended the benefits to all segments of borrowers to and through all banks in entire Jammu and Kashmir, thus pre-empting a situation of crisis which could have developed as the life limps back to normalcy.
These decisions aimed at providing the much-needed relief to the borrowers as well as the banks operating in the state in view of the current situation have been approved by J&K State Level Bankers’ Committee (SLBC) at a special meeting convened under the chairmanship of Chief Secretary BVR Subrahmanyam today in Srinagar, even as the recommendations are subject to the approval by the Reserve Bank of India, which in all probabilities, is a given, considering Centre’s focus on restoring normalcy in J&K, sources informed.
While business community in Jammu was already voicing their concerns on the difficulties faced by them, the government was aware of the angry demands from industrialists and traders in Kashmir which it would witness when the situation becomes normal in Valley.
Pre-empting this, the SLBC today accorded sanction to an array of special dispensations for borrowers and banks, which it said had become imperative in view of the prevailing situation, according to the resolution it adopted, a copy of which lies with The News Now.
The major move came in the form of special but temporary relaxations in IRAC (Income Recognition, Asset Classification and Provisioning pertaining to Advances) norms from 90 days to 180 days with effect from 1 August, 2019 which would remain in force till 1 March, 2020.
Under IRAC norms, when the borrower fails to pay the installment or fails to pay the interest or fails to pay both interest and installment for more than 90 days, the account is classified as substandard assets or NPA.
Keeping the interests of business community in mind, which primarily works on loans, the SLBC extended the repayments by aligning them to the extant IRAC norms for up to 90 more days, giving the borrowers a total of 180 days now for payments due from 1 August.
The government has admitted that August, September and October will be the most stressful period for the businesses and has extended the 90 days relaxations for these three months, while aligning the repayments afterwards in a phased manner.
For the payment falling due from 1 August, 2019 to 31 October, 2019, the borrowers will get 180 days, 90 extra days.
In the next two months, i.e. for the payment falling due from 1 November, 2019 to 31 December, 2019, the time permitted would be 150 days, 60 days more than the usual 90 days period; while the payments due in subsequent two months (1 January, 2020 - 28th February, 2020) will have to be repaid within 120 days against 90 usual days.
It would only for the payments due after 1 March, 2020 and onwards, the IRAC norms would restore to their normal criteria which is 90 days.
The relaxations for the business community included allowing Income Recognition upto 180 days and also the waiver of additional provisioning of 5% against the exposures not classified as NPAs in terms of the proposed relaxations.
Extending the benefits of this relaxation to almost every stakeholder, the government said that this dispensation would include all segments of borrowers, from Micro, Small, Medium Enterprises, Trade, Transport to Tourism, Agriculture, Housing and other sectors as well, including large borrowers.
Further, the dispensation would be made applicable to all banks operating in Jammu and Kashmir including Regional Rural Banks and Cooperative Banks.
These are “path-breaking steps”, remarked Deputy Commissioner Srinagar Dr Shahid Iqbal Choudhary, who also attended the meeting, even as he listed out the major decisions.
The decisions of SLBC came on the day when Centre announced its MIPS plan to purchase apples worth Rs 8000 Crore from farmers in Kashmir, a move which aims to enhance the income of over 7 lakh farmers by about Rs 2000 Crore.