Lockdown 4.0: RBI May Extend Loan Repayment Moratorium By 3 More Months

File picture of Reserve Bank of India - Sakshi Post

MUMBAI: If a research report of State Bank of India (SBI) is anything to go by, the Reserve Bank of India (RBI) may extend the moratorium on repayment of loans by another three months. The RBI move in this regard is expected to be the most likely fallout in the wake of the Central government extending the nationwide lockdown till May 31st.

The nationwide lockdown, which has been in force since March 24th, was extended till May 31st by the National Disaster Management Authority (NDMA) as part of the country’s preventive initiatives against coronavirus pandemic. The RBI, in March, had announced a three-month moratorium on repayment of all pending term loans between the period of March 1st and May 31st 2020.

The SBI research report, named ‘Ecowrap’, said, “With the lockdown now extended up to May 31st, we expect the RBI to extend the moratorium by another three months.” It said that the extension of the moratorium by three months would mean that companies need not pay till August 31st, 2020. And this would in turn imply that there is almost minimal possibility of companies being in a position to service their interest liabilities till September.

As per the RBI norms, failing to repay the interest liabilities would mean that the account could be categorised as non-performing loans. In view of this, as the report said, the RBI needs to give operational flexibility to banks for a comprehensive restructuring of the existing loans and also a reclassification of the 90-day norm.

Long before the current ‘Lockdown 4.0’, Prime Minister Narendra Modi first announced the nationwide lockdown for 21 days from March 24th at the end of the ‘Janata Curfew’ on March 23rd. The unprecedented countrywide shutdown was ordered to combat the COVID-19 pandemic that was beginning to rear its ugly head in the country. Subsequently, the lockdown was extended twice, till May 3rd first and then again until May 17 before the NDMA stretched it recently up to May 31st.

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