Customers accounting for 40.43 per cent of outstanding loans in the financial system availed the benefit of moratorium allowed by the Reserve Bank of India (RBI) for borrowers affected by the COVID-19 pandemic as on August 31, 2020.

As per “Report on Trend and Progress of Banking in India 2019-20,” most sectors reported lower outstanding loans under moratorium in August 2020 compared to April 2020.

However, Micro, Small and Medium Enterprises (MSMEs) registered a marginal increase. The number of MSMEs customers availing moratorium increased to 78 per cent in August 2020, reflecting sector’s stress.

UCBs shoulder the brunt of stress

The distribution of moratorium sought in MSME loans indicates that urban co-operative banks (UCBs) bore the brunt of incipient stress (with 89.60 per cent of the total outstanding within the segment opting for the moratorium), followed by PSBs (public sector banks at 75.42 per cent) and NBFCs (non-banking finance companies at 67.01 per cent), the report said.

In the case of moratorium availed for individual loans outstanding, the share of SFBs is the highest (at 69.39 per cent of the total due within the segment opting for the moratorium), followed by UCBs (57.64 per cent) and NBFCs (56.51 per cent).

Deferment of payments

The report assessed that nearly two-thirds of the total customers of PSBs and half of the total customers of private sector banks (PVBs) exercised the option to defer payments in April 2020.

RBI observed that as on August 31, 2020 this reversed, with PVBs accounting for a larger customer base under moratorium than other categories of lenders, mainly due to a four-fold increase in their MSME customers availing the benefit, and with a sizeable customer base across categories (majorly individuals) opting out of moratorium in case of PSBs.

According to the central bank, the commercial banking sector’s financial performance was shored up in H1:2020-21 by the moratorium and the standstill in asset classification.

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