As per the SBI Research report, as the nationwide lockdown continues until May 31, the RBI may extend the EMI moratorium on loan repayment of term loans for 3 more months.
The National Disaster Management Authority (NDMA) on Sunday in view of the increasing coronavirus positive cases across the length and breadth of the country announced lockdown 4.0 till May 31. On March 24, to contain the spread of the coronavirus infection, PM Modi announced lockdown first for 21 days from March 25. This was again extended till May 3 and then later till May 17.
Earlier, in March the RBI had allowed banks to grant 3-month moratorium on repayment of all term loans that become due for payment between March 1, 2020 and May 31, 2020. "With the lockdown now extended up to May 31, we expect RBI to extend the moratorium by three months more," SBI's research report- Ecowrap said.
The report suggested that moratorium for another 3 months means borrowers will not have to service their loan liability till August 31, 2020 and this point out that there shall be minimal chance of repayment then in September.
And as per the RBI guidelines failure to repay the interest on loan may result in the loan account being classified as non-performing asset.
"Thus, the RBI needs to give operational flexibility to banks for a comprehensive restructuring of the existing loans and also a reclassification of 90 day norm," the report said.
The RBI circular dated June 7 is rigorous and offers little flexibility to banks.
"The revised restructuring norms should give banks to restructure like say converting interest liabilities up to March 2021 into term loans, repayable in 3-5 years for working capital and at the end of the tenor in case of term loans," the report added.
Also, there is clarification sought from the RBI on whether expansions in working capital will be part of Covid 19 debt, the report said.