RBI may extend loan moratorium period for stressed sectors: Report

The loan moratorium deadline is nearing soon, and now reports are stating that the Reserve Bank of India (RBI) may provide further relief in the EMI installments for some stressed sectors. RBI’s loan moratorium benefit is available till August 2020 end.

The Reserve Bank of India (RBI) may allow lenders to offer companies in stressed sectors such as aviation, automobiles, and hospitality the option to pause loan repayments even after the six-month moratorium ends on August 31, two people directly aware of the discussions said.

The banking regulator has been conducting an impact assessment of sectors and borrower segments by collating data on repayments and cash flows of borrowers since the lockdown was announced in March to get a better understanding of the challenges faced by borrowers, the people aware of the talks between RBI and the banks said on condition of anonymity.

“While it’s a foregone conclusion that the moratorium will be extended for certain segments beyond August, the fine print is still a work in progress,” said the first person cited above. “For starters, RBI is of the view that some sectors will continue to need support from lenders as the current economic pain is expected to linger for them.”

Companies, particularly in stressed sectors such as hospitality, automobiles, and aviation, might be given a breather,  as per the sources. The central bank has started impact assessment – including gathering data on repayment and cash flows of borrowers during the lockdown, to gain a “better understanding of the challenges faced by borrowers,” they added.

“The real condition of the affected firms will not be known if the moratorium is extended. It is important that some of these sectors get relief,” said Ashutosh Mishra, head of research, Ashika Stock Broking.

Separately, both government and RBI are considering allowing banks to restructure company loans without having to set aside funds to cover potential losses as a one-time exemption. “We are in intense engagement with RBI for a one-time restructuring of debt and finances for businesses. The process to ascertain the level of stress, whether Stress 1 or Stress 2 or NPA is underway,” finance minister Nirmala Sitharaman said last month. The idea is to help businesses exit the crisis honorably, she added.