RBI's eye on loan restructuring exercise after moratorium

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Mumbai, Ta. Saturday, August 29, 2020

With the moratorium expiring on August 31, the eyes of borrowers are now on the Reserve Bank.

The RBI moratorium is unlikely to be extended as the corona has facilitated the moratorium and there are indications that economic activity in the country is picking up again.

The RBI will also keep an eye on the loan restructuring exercise after the moratorium is completed. Extending the moratorium could affect borrowers' willingness to repay loans, the RBI said. Since March 1, 2020, the Reserve Bank has provided moratorium facilities for a total of 6 months. In addition to commercial houses, this facility has been provided to individual loan holders.

There is no denying the possibility of pressure on the banking system if the moratorium facility is extended further, a Reserve Bank official said. Banks' cash flow is currently stagnant.

It is estimated that 40 to 5 per cent of the total loan holders have availed this facility. The condition of repayments will also have to be looked into after the moratorium is completed. However, the Reserve Bank has given conditional exemption to banks for loan restructuring so as not to increase NPAs in banks. Analysts are skeptical of the success of the loan restructuring scheme announced by the Reserve Bank as it has several limitations.

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