The finance ministry has started consulting with various industry leaders and the banks about the necessity of extending the loan moratorium beyond August, when the second three-month long respite ends. According to industry sources, the government wants to continue the moratorium for companies in most affected sectors such as automobile, steel, hospitality and real estate for another three months until November.
"The government is likely to advise the same to Reserve Bank of India (RBI) after getting the feedback from the banks. However, the government is not in favour of offering it to all the sectors as many of the companies in essential sectors are bouncing back to normalcy," a top executive said.
The government is also considering the one-time loan restructuring demand of the industry bodies. Earlier finance minister Nirmala Sitharaman said, "We are in intense engagement with the RBI for a one-time restructuring of debt and finances for businesses. The process to ascertain the level of stress, whether Stress 1 or Stress 2 or NPA, is under way." The idea is to help businesses to exit the crisis honourably, she added.
However, the government is worried with the way some of the corporates are making use of the moratorium scheme to preserve their liquidity, though they didn't face any cash flow crisis. It is not clear how the government and RBI will be able to tweak it to avoid exploitation of the scheme.
The RBI had, on March 27, allowed commercial banks, co-operative banks, financial institutions, and non-banking finance corporations (NBFCs) to offer moratorium on payment of instalments of all term loans outstanding as on March 1 to help alleviate hardship of borrowers.
A total of 3.2 crore account holders in state-owned banks availed the moratorium on loans, Finance Minister's Office tweeted in May. State Bank of India chairman Rajnish Kumar last week said that across the board relief on payment of loan dues is not needed beyond August and he expects the RBI to take a more sectoral approach in the coming months.
The microfinance sector has been affected badly because of the lockdown and about 75 per cent of the borrowers from the sector -- like Kirana owners, workshop owners, roadside vendors, tailors and weavers in urban and semi-urban pockets -- sought moratorium on loan repayments as their livelihood has been blocked. Though just 30 per cent of the micro loan borrowers had sought moratorium until the first week of April, the ratio jumped to about 75 per cent, according to the data compiled by microfinance industry associations.
As many as 328 companies, including well-known industrial firms, have sought moratorium on loan repayment, said rating agency ICRA in April. Tata Power Renewable Energy, JSW Paints, JSW Steel, Kalyan Jewellers, MRPL, Piramal Enterprises, TV Sundaram Iyengar, Centrum Financial Services, Air India Express, GMR Hyderabad Aviation SEZ, Hindustan Copper, Jindal Power, and Jindal Steel & Power are among the companies that sought moratorium on loan repayment, ICRA said.
The stocks of companies in banking and financial services have been hammered the most since the lockdown started. The announcement of moratorium also hit the BFSI stock prices, as delaying loan payments increased uncertainty about asset quality.