Loan restructuring may only provide short-term respite to lenders

The measures will lower credit cost to some extent, but analysts are sceptical of asset quality of such loans

The Reserve Bank of India’s (RBI’s) measures aimed at resolving Covid-19 stress and restructuring of MSME (micro, small and medium enterprises) advances in light of the pandemic-led economic disruptions, announced in Thursday's monetary policy, enthused those investing in bank and non-banking financial company (NBFC) stocks. The Nifty Financial Services index gained 2 per cent intra-day on Thursday.
 

There is little doubt that resolution/restructuring provides a breather at a time when bank and NBFC stocks were struggling to retain investor support amid potential escalation in credit cost (provisioning as a percentage of loan book). In fact, restructuring of personal loans was