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Banks say no to moratorium extension, industry says it needs it badly; RBI non-committal

Mumbai: Reserve Bank of India (RBI) governor Shaktikanta Das remained non-committal on both moratorium and a loan-restructuring scheme despite conflicting demands from lenders and industry, reports said.

The governor earlier this week called for an infrastructure stimulus and said that any subsidy has to be through direct benefit transfer.


In an interaction organised by the Confederation of Indian Industry (CII), HDFC chairman Deepak Parekh made a representation to the governor for not extending the moratorium beyond August 31, ToI reported.

“We see that even those who can pay — whether individual or corporates — are taking advantage of the moratorium and not repaying, and it is hurting us. There is some talk that the moratorium is going to be extended, our request is that it should not be done,” said Parekh.

Parekh called for a restructuring of loans to prevent a financial crisis.

“According to RBI’s projections, NPAs (non-performing assets) could be 12.5-14.7% next year. If restructuring is not given and banks, NBFCs (non-banking financial companies) and microfinance companies with this kind of NPAs will see their ratings come down, they will not have access to funding and we will have a major crisis,” said Parekh. He added that a similar restructuring was provided in 2008 and is needed to avoid a bigger problem.

Das, however, remained non-committal but said that all suggestions are being noted.

Parekh’s plea was in contrast to a representation made by Bharti Enterprises vice-chairman and past president of CII, Rakesh Bharti Mittal, calling for an extension of the moratorium. “Given the stress in the economy and the huge pressure, the moratorium extension should be seriously looked at and considered,” he said.

Mittal also called for a relaxation of foreign borrowing norms to help corporates tide over liquidity issues.

Meanwhile, highlighting the plight of the hospitality sector amid the Covid-19 pandemic, the Hotel Association of India (HAI) has said that in absence of support from the government and the RBI, the Indian hotel industry will collapse.

The industry body has reiterated its demands including extension of the moratorium on interest and repayment of principal for the entire financial year 2021 till March 31, and the interest due is added back to the total principal outstanding and the loan term extended by 12 months.

“This will solve the current cash crunch as there is expected to be almost no demand for FY21,” an HAI statement said.

Further for the ‘revival phase’ interest rate should be 200 basis points higher than repo rate.

Citing a recent study by McKinsey, the HAI said airlines and hotels will be the worst impacted sector in India, with around 75 per cent output decline in Q1 FY21 compared to Q4 FY20.

The revenue loss to the hotel industry is expected to be to the tune of Rs 90,000 crore in the year 2020, it added.

“The Covid-19 pandemic has led to demand destruction in excess of 90 per cent for the tourism and hospitality sector which employs nearly 4.5 crore people, provides livelihood to around 16 crore people, and contributes 9 per cent to India’s GDP,” it said.

While the RBI has announced an immediate term to avert the crisis by allowing moratorium on loan repayment, HAI said that on behalf of the Indian hospitality sector, it has been recommending more relief measures for the “survival, revival, and thrival” of the sector.

It added that the hotel industry is now solely focused on survival and has been requesting the RBI to extend more proactive support.

The current debt levels in the organised part of the industry stands at Rs 45,000 crore.

“Unfortunately, an immediate term solution will only defer the crisis as what is needed is a longer-term solution spanning the next 24-36 months which solves for both stakeholders: the borrower (unable to pay the interest and principal for the foreseeable future) and the lender (loans becoming NPAs),” the statement said. (IANS inputs)