RBI extends loan moratorium by 3 more months

The Reserve Bank of India on Friday extended the moratorium on loan repayments by three more months. The facility, thus, stands extended till August 31.

Banks are so far offering moratorium to retail customers on a blanket ‘opt-out’ basis and to wholesale customers on case-to-case ‘opt-in’ basis.

Addressing a press conference after an off-cycle meeting of the Monetary Policy Committee, which decided to bring down the repo rate by a further 40 basis points, RBI Governor Shaktikanta Das said that the RBI will roll over a Rs 15,000 crore refinance facility for SIDBI for 90 days. The central bank also extended the export credit period to 15 months from one year.

VK Vijayakumar- Chief Investment Strategist- Geojit Financial Services, said the extension of the moratorium on loans by another three months has come as a relief. "Yet, one big takeaway from the policy announcement is that the stress in the banking sector will continue," he said.

Shares of financial companies came under severe selling pressure after RBI's announcements, and they also dragged BSE Sensex some 320 points lower to 30,605.

Private lender ICICI Bank tanked the most at 2.81 per cent at around 10.30 am (IST). It was followed by Axis Bank (down 2.77 per cent), Bajaj Finance (down 2.74 per cent). HDFC Bank and Kotak Mahindra Bank were also down over 1.50 per cent in the morning trade. The BSE Bankex was down 2.17 per cent at 19,964.

Among rate-sensitive indices, BSE Auto and Realty indices are down 1.05 and 0.55 per cent, respectively.

Das said the impact of the coronavirus-induced disruption is turning out to be more than expected. "However, a ray of hope comes from the forecast of normal monsoons," he said.

The Governor said the monetary policy transmission has continued to improve and the Reserve Bank of India will continue to be vigilant and in battle readiness to address the dynamics of an unknown future and will preserve stability of financial markets.

"We are trying to be proactive. The central bank will take whatever measures are needed to be taken due to the Covid pandemic," he said.

March quarter commentaries of banks showed customers representing 25-71 per cent of loans have availed moratorium so far. Within retail segments, higher instances of moratorium utilisation were observed in agri loans, micro-credit, commercial vehicle loans and other unsecured retail products like credit cards.

For instance, Bandhan Bank reported 71 per cent of its loan by value under moratorium. A total of 64 per cent of this bank's total advances are to micro-businesses. RBL Bank, whose advances to retail segment now account for 56 per cent of total advances, reported a 35 per cent of loan by value under moratorium.

Big lenders with considerable retail portfolios such as ICICI Bank, Axis Bank and Kotak Mahindra Bank have also seen this percentage anywhere between 26-30 per cent.