RBI may extend relief on repayment of loans

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.”

RBI governor Shaktikanta Das is trying to provide relief to struggling businesses as the coronavirus pandemic forces people to stay indoors, driving down demand for the airline and hospitality industry to a trickle.

The prolonged lockdown to contain the spread of the virus has also forced many firms to shutter operations, leaving millions of people jobless and pushing the economy toward its worst contraction since Independence.

“RBI could be looking at extending the moratorium for certain sectors like automobile, hospitality, etc.,” said the second person. The loan moratorium is unlikely to be extended to individual borrowers.

On July 10 State Bank of India chairman Rajnish Kumar had brushed aside the need for a blanket extension of the deferment benefit. He had said certain sectors need some relief and that RBI will take a call based on data from banks.

Around 29% of loans given by banks and mortgage lenders and 59% of loans by non-bank lenders were under moratorium between April and June, according to disclosures by banks and non-banking financial companies.