INSUBCONTINENT EXCLUSIVE:
to soften the blow from Covid-19 could fall short of requirement
In such a situation the moratorium on interest and loan repayment will more than offset the benefits of extra liquidity.
Faced with such a
situation, these banks would be reluctant to extend the moratorium to certain categories of borrowers such as government employees whose
salaries have not been impacted or large companies with the wherewithal to tide over the crisis.
Last week, the monetary authority lowered
the accommodation under marginal standing facility (MSF), under which banks borrow from RBI against government securities.
Concerns for
RBI measures could be less than the amount that banks would not receive as interest payments and principal repayments from borrowers during
the three-month moratorium
Since these banks will have to continue to pay depositors the interest and maturity amounts, such a situation could actually worsen the
10 lakh crore and loan book of Rs 6 lakh crore
The CRR cut and MSF flexibility will release Rs 20,000 crore liquidity for the bank
Suppose the moratorium becomes effective on 50% of the loans having an average yield of 12% and average tenor of 5 years
A three per cent delay in interest (for the three months) would mean deferred interest inflow of Rs 10,500 crore
This could cause a liquidity crunch for the bank and impact its ability to lend.
After June, the bank may either raise the loan EMI or
extend the tenor of the loan
This would depend on whether the borrower has the capacity to afford higher EMIs or is in a position to repay the loan over a longer tenor
According to an industry person, in case of stress loans which are yet to be categorised as non-performing assets, banks will consult RBI on
freezing the clock in banking parlance).