RBI Expected to Extend loan Moratorium Scheme by Another 3 Months

According to a recent report (named ‘Will supply create its own Godot/Demand? Over to RBI now!’)by SBI (State Bank of India) economists, the RBI (Reserve Bank of India) may extend the moratorium facility on loans by another 3 months.

Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI said that as the lockdown is now extended up to 31^st May 2020, it is expected that RBI will extend the moratorium by 3 more months. This means that companies need not pay till August 31.

If this happens, it will imply that there is still minimal possibility of companies to be able to service their interest liabilities in the month of September, failing which the accounts might be classified non-performing assets (NPA) as per extant norms.

The report said that the RBI needs to give operational flexibility to the banks for a comprehensive restructuring of their existing loans and reclassification of the 90-day norm.

The RBI had initially announced the moratorium for loan dues falling March 1 and May 31 to help the borrowers to tide over the crisis phase. But with more extension in lockdown, companies are still unable to resume their businesses yet.

Also Read: Is Your Bank Offering Three Months’ EMI Moratorium Check List

The report also claims that of the Rs 20 lakh crores economic package, the direct fiscal impact of the reforms comes to around only Rs 2.0 lakh crore (1% of GDP). Hence, the package does not do much to boost the consumption in the short term. That could act as a drag on growth. Goldman Sachs, too had said a similar thing that the economic package recently announced by the government lead by Prime Minister Narendra Modi to help economic recovery may not have an immediate impact on growth. Goldman Sachs estimates real GDP to fall by 5% in the fiscal year 2021.