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Moratorium extension to determine speed of economic recovery: Jefferies' Chris Wood

Earlier, Reserve Bank of India (RBI) had announced a total of six months of moratorium on loan EMIs (equated monthly instalment) starting from March 1, 2020 to August 31, 2020

twitter-logoBusinessToday.In | July 24, 2020 | Updated 17:28 IST
Moratorium extension to determine speed of economic recovery: Jefferies' Chris Wood

The decision on moratorium extension would be critical in determining the speed of recovery of the Indian economy, a global equity strategist said. The decision about extending the moratorium till December 2020 would also have an impact in deciding the pace of recovery of banks and realty sector, said Christopher Wood, global head of equity strategy at Jefferies, in his weekly note - GREED & fear. "Still until proven otherwise, investors should probably assume that the moratorium will be extended for another four months to the end of the calendar year," Wood added.

Earlier, Reserve Bank of India (RBI) had announced a total of six months of moratorium on loan EMIs (equated monthly instalment) starting from March 1, 2020 to August 31, 2020. The decision was taken to provide relief to the borrowers amid the financial crisis caused due to coronavirus.

Adding, Wood said that moratoriums are generally hard to bring to an end and endurance is forced on the banks. He said that moratorium could set off a consumer lending non-performing loans (NPL) cycle.

Meanwhile, State Bank of India (SBI) Chairman Rajnish Kumar recently had said that across the board blanket extension of moratorium deferment is not needed after August 31. RBI will now have a clear data from all banks and it will take an appropriate decision regarding this, Kumar said while speaking at a two-day virtual conclave organised by SBI. "It is premature to predict that there will be an extension of moratorium till December," he added. "Some sectors have been severely affected. I expect the RBI to take a calibrated approach on the issue," Kumar had.

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