With the govt extending the nationwide lockdown up to May 31, the Federal Reserve Bank of India (RBI) is probably going to increase the moratorium on repayment of loans for 3 more months, consistent with an SBI research report.
On Sunday, the National Disaster Management Authority (NDMA), the nodal department, announced lockdown 4.0 till May 31 to see the spread of the novel coronavirus.
The lockdown was first announced by Prime Minister Narendra Modi on March 24 for 21 days during a bid to combat the COVID-19 pandemic. it had been first extended till May 3 and again till May 17.
In March, RBI had allowed a three-month moratorium on payment of all term loans due between March 1, 2020 and should 31, 2020.
“With the lockdown now extended up to May 31, we expect RBI to increase the moratorium by three months more,” SBI’s research report- Ecowrap said.
The report said the moratorium for 3 more months will imply that companies needn’t pay till August 31, 2020, and this suggests that there’s almost minimal possibility of companies having the ability to service their interest liabilities then in September.
Failing to repay the interest liabilities will mean the account could be classified as non-performing loans as per the RBI norms.
“Thus, the RBI must give operational flexibility to banks for a comprehensive restructuring of the prevailing loans and also a reclassification of 90 day norm,” the report said.
The RBI’s June 7 circular is stringent and provides little flexibility to banks.
“The revised restructuring norms should give banks to restructure like say converting interest liabilities up to March 2021 into term loans, repayable in 3-5 years for capital and at the top of the tenor just in case of term loans, the report said.
RBI also must also clarify whether capital expansions classify as COVID-19 debt, it said.