Deepak Parekh, chairman of mortgage lender HDFC Ltd, today pleaded to the RBI Governor Shaktikanta Das that the regulator should not extend the six-month moratorium on term loans beyond August this year. "Please don't extend the moratorium," pleaded the 75-year-old Deepak Parekh to Governor Das who addressed and interacted with the members of Confederation of Indian Industries (CII) today.
Parekh, whose group has interest in bank, NBFC, insurance and securities, reasoned that there are borrowers, including both individual and corporate, who have the ability to pay but are taking advantage of the moratorium to defer payments. "The extension of moratorium is going to hurt us. It is going to hurt the small NBFCs more particularly," said Parekh. Many NBFCs have offered moratorium to their customers, but thy don't receive the same support from banks from whom they have borrowed.
Many NBFCs fear asset liability mismatches as revenue stream or cash flows on loans via EMIs have stopped while they have to meet redemption requirements on loans that are coming up for maturity. The RBI Governor, however, refused to make any commitment on Parekh's request. "I have noted the suggestion. I won't be able to make a comment now," said the Governor. Parekh's statement can be interpreted as the voice of the industry, which until now had not been expressed clearly.
Currently, the banking industry's Rs 40 lakh crore book is under moratorium which includes both retail and term loans to corporate sector. There is a likelihood of NPAs coming from the moratorium book. Any extension beyond six months would impact the banks and NBFCs' cash flow. Those taking moratorium would find it difficult to pay as the economic activity is not improving, or expected to improve in the near future. The RBI is already in discussion with various stakeholders including government on the extension of moratorium. There are suggestions for extension of moratorium for select sectors which are the hardest hit.