Amidst talks of a possible extension in the moratorium on term loans, initial trends indicate that the number of borrowers using the facility has come down in recent months.

First quarter results of banks and NBFCs reveal that availment of loan moratorium by borrowers is on a declining trend compared to the previous quarter ended March 31, 2020.

These are, however, only initial trends with more results, especially of public sector banks, yet to be announced. Bankers are also cautious and point out that more borrowers could still take the moratorium in coming weeks.

Amitabh Chaudhry, Managing Director and CEO, Axis Bank, also said the moratorium would have to be monitored as borrowers could still opt for it.

Provisioning up

Most banks have increased provisioning and are of the view that a clearer picture would be available only when the moratorium ends. The current moratorium ends on August 31, 2020.

Private sector lender Axis Bank on Tuesday reported a sharp fall in its loan book under moratorium as on June 30, 3030. According to the lender, just 9.7 per cent of its loan book by value was under moratorium at the end of the first quarter compared with 25-28 per cent earlier.

Similarly, Bajaj Finance, in its results declared on Tuesday, also said that ₹21,705 crore or 15.7 per cent of its assets under management of ₹1.38 lakh-crore are under moratorium as on June 30, 2020. It was much higher at ₹38,599 crore or 27.1 of the AUM of ₹1.43 lakh-crore which was under moratorium as on April 30, 2020.

“The reduction was driven by the auto, rural, and SME segments. The conversion of term loans into flexi loans led to about 22 per cent (₹3,600 crore) of overall decline,” said a note by Motilal Oswal on Bajaj Finance, adding that according to the management commentary without the flexi loan conversion, the moratorium rate would have been 18.3 per cent.

Last week HDFC Bank had revealed that nine per cent of its book is under moratorium as on June 30, 2020.

Similarly, Federal Bank too had said the level of moratorium has come down. As on July 12, net moratorium book (excluding gold loans and loans against liquid securities) of the bank was at 24 per cent as against 35 per cent in May.

In the case of Bandhan Bank, the moratorium has been showing a declining trend.

A note by ICICI Securities said that the lender’s moratorium improved from 71 per cent in April to 24 per cent as of July 3, 2020 with micro finance portfolio down from 100 per cent in April 2020 to 30 per cent. However, the mortgage book witnessed marginal increase in moratorium at 15 per cent, it said.

L&T Finance Holdings also reported that the percentage of borrowers opting for moratorium drastically came down in the first quarter this fiscal as against the fourth quarter last fiscal.

“Considerable reduction in portfolio under moratorium for retail products from 79 per cent in March 2020 to 44 per cent in June 2020,” it noted, adding that the overall moratorium for Infrastructure finance, IDF and Real Estate borrowers remained close to 40 per cent.

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