Centre May Extend Loan Moratorium Up To December

Given the current situation wherein coronavirus spread is showing no signs of abeyance and lockdowns are again being imposed in some of the cities in India, the government is holding discussion to extend the loan moratorium deadline to December 31, 2020 instead of the current August 31, a senior government official told a leading online business portal.

Centre May Extend Loan Moratorium Up To December

"There has not been any decision yet on it (extension of date). But, we are holding regular discussions with the RBI (Reserve Bank of India) and other stakeholders, whether such an extension is possible. Maybe till the end of this year," the official said.

The loan moratorium was first extended in a bid to provide relief to borrowers who suffered any kind of financial unsteadiness on account of Covid 19 and the resultant lockdown. And if the loan moratorium is extended further, bad loan identification as well as their provisioning shall not happen before FY2020-21 end.

"In that case, pumping money into PSBs (public sector banks) for recapitalisation can't happen before April (next financial year)," the official said.

As per S&P NPA of banks could increase to 14% in FY21 from 8.5% in FY20/ "The COVID-19 pandemic may set back the recovery of India's banking sector by years, which could hit credit flows and ultimately, the economy," the agency said in a note last month.

Also Shaktikanta Das stressed on the fact that banks need to augment their capital base for coming through the crisis. At the same time, RBI governor has asked banks to carry out Covid 19 stress test in order to prepare for risk management as well as have sufficient buffers to meet the unprecedented situation due to the pandemic. "We have recently advised all banks, non-deposit taking NBFCs and all deposit-taking NBFCs to assess the impact of COVID-19 on their balance sheet, asset quality, liquidity, profitability and capital adequacy for FY21," Das said.

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