RBI unlikely to extend loan moratorium: Report

The Reserve Bank of India is unlikely to extend the moratorium on loan repayments after it ends on August 31, a PTI report said on Saturday, which cited sources familiar with the matter.

In March, the central bank had introduced a three-month moratorium on bank loans to ease burned on the borrowers during the COVID-19 lockdown. Later, the bank extended the moratorium period by another three months till August 31.

The report cited its source as saying that it was only a temporary reprieve to borrowers affected by the pandemic.

The source further said that a longer moratorium period exceeding six months can impact credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments.

It is worth mentioning that banks like HDFC and Kotak Mahindra Bank had requested RBI Governor Shaktikanta Das not to extend the moratorium as many are taking undue advantage of the facility.

As the various containment measures put in place by the government begin to ease and the economic activity gathers pace, continuation of temporary measures would not be sufficient in addressing cashflow problems of the borrowers. A more durable solution was, therefore, needed to rebalance the debt burden of viable borrowers, both businesses as well as individuals, relative to their cashflow generation abilities under the post-lockdown scenario, the sources said.

What that objective into consideration, the RBI recently announced a special resolution window for COVID-19-related stress within the existing Prudential Framework for Resolution of Stressed Assets.

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