Money & Banking

With extended lockdown, lenders hope for extension of loan moratorium

Surabhi Mumbai | Updated on May 13, 2020 Published on May 13, 2020

Flow of funds A lender of last resort is important for financial stability istockphoto   -  istockphoto

With the national lockdown on till May 17 and chances of further extension, many lenders are of the view that the three-month moratorium on term loans can be extended to reduce pressure on borrowers. A final decision will, however, be taken by Reserve Bank of India on the issue.

Liquidity measures

Apart from the moratorium, the RBI has taken a number of measures to increase liquidity in the system and help borrowers tide over the economic slowdown. Finance Minister Nirmala Sitharaman, on Wednesday, also announced an economic package to address the current situation, and many of the measures could bring more money in the hands of the people.

“When the moratorium was originally announced, the lockdown was estimated till middle of April. Since then, it has been extended by a month. Logically speaking, there is a case (for extension), but a holistic decision can only be taken by the government and the RBI,” said Sunil Samdani, Chief Financial Officer, Bandhan Bank.

YES Bank Managing Director and CEO Prashant Kumar had recently also expressed hope that the RBI would consider extending the moratorium.

“Going forward, we are hopeful that the RBI will extend the moratorium and give more comfort on the interest side. Otherwise, everyone will be affected; it is not just YES Bank. Some dispensation should come,” Kumar had told BusinessLine in a recent interview.

Speaking to reporters at the fourth quarter results call, Ajay Piramal, Chairman, Piramal Enterprises Ltd, had also noted that many people have said they want the moratorium to be extended, but the final decision rests with the RBI.

Micro finance players have also raised the issue that the three-month moratorium should be extended by another two to three months, as it would help borrowers resume their livelihoods and then start repayments.

RBI Governor Shaktikanta Das had, on March 27, announced a moratorium of three months on payment of instalments in respect of all term loans due between March 1, 2020, and May 31, 2020.

Red zones

However, since then, the lockdown has been extended, and there are indications that it could be extended further in some red zones where there have been rising cases of the novel coronavirus infection.

Bala Parthasarathy, co-founder and CEO, MoneyTap however, noted that some States have already partly opened. “Our position is that the existing moratorium is the right timeline. Only on May 17 when the lockdown is lifted, we will know the extent of the damage and how much hardship the customers are facing. Then that will have to be factored in and it can be done fairly quickly,” he said.

Published on May 13, 2020
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