Banks In The Loop To Increase Moratorium Period

Banks in the loop to increase the moratorium period, ending on August 31, know what is the difficulties of banks. The moratorium expires on August 31 on repayment of term loan due to COVID. The situation is not clear in the banking sector to take it forward. The pitches on corporate loans are likely to be resolved by the Kamath Committee report, but how to continue with retail loans (loans taken under term loan schemes like home, auto, personal loans), its roadmap is not the way Is getting out

On 6 August 2020, RBI Governor made two important announcements regarding the current Moratorium. Firstly, the KV Kamath Committee was formed on corporate loan restructuring (repayment of loan with new terms and conditions). Banks have been asked to take a decision on personal retail loans which come with term loan schemes like auto, home.

RBI had made it clear that only those facilities will be provided whose income is affected by Kovid-19. RBI Governor Dr. Shaktikanta Das again said in front of the media on Friday that, “Whose monthly installment is to be forgiven and whose not, it is for the banks to decide.” So far, only the board of Union Bank of India Have decided on this only. SBI and PNB, the two largest banks in the country, are likely to decide next week. No indication has been received from the private sector banks that give the highest retail loans.

Banks trouble

Not only this, the Finance Ministry and RBI have been told by some small public sector banks, regional rural banks and cooperative banks that it is difficult for them to give further relief on the payment of retail loans. The main reason is being told that for the last six months, there has not been any loan allocation from them nor is there any debt recovery. This has deepened the possibility of impacting the activities of banks with small loan books.

Second problem, banks are telling how to decide whose income has been affected by Kovid and whose not. It will not face any problem regarding business loans, but the challenge will be to choose the home loan, auto loan customers on this basis. Until now, any loan account holder could take advantage of it. Public sector Punjab and Sindh Bank, UCO Bank, Bank of Maharashtra and government-owned IDBI Bank are among the banks that are feeling the most pressure of the financial situation arising out of Kovid-19.

Banks, in their internal research, have found that even those who retained income did not repay the loan and took advantage of the Moratorium Scheme. A senior official of a bank based at the New Delhi headquarters said that his internal report has revealed that the number of customers between 45 and 55 years of age is enough to benefit from Moratorium. Of this, a large number are those who are salaried and probably are not returning the loan despite having no effect on income.