SBI chairman Rajnish Kumar sees no need for a blanket moratorium beyond 31 AUG
2 min read . Updated: 10 Jul 2020, 08:02 PM ISTThe central bank had, in May, announced a three-month extension of the moratorium by three months to 31 August
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As expectations of another round of moratorium grows, the chairman of India’s largest lender State Bank of India believes that a blanket extension of this deferment benefit is not required after 31 August.
The central bank had, in May, announced a three-month extension of the moratorium by three months to 31 August. The pandemic and the ensuing lockdown from 25 March lead to a near-halt of economic activities, rendering people jobless and affecting their repayment capabilities.
Speaking through video-conference at the 7th SBI Banking & Economics Conclave on Friday, Rajnish Kumar said that while it is premature to say if there will be another extension of the moratorium, the Reserve Bank of India (RBI) will have data from all lenders and would take an appropriate call.
“But if you ask me, an across-the-board moratorium is not required anymore. However, certain sectors may need some relief and based on the data available with RBI, there will be a calibrated response," said Kumar.
The lender has ₹5.63 trillion loans under moratorium, according to the bank’s FY20 annual report. Kumar had told analysts on 5 June that of the 9.4 million term loan accounts, 0.9 million have not paid any instalment, 0.7 million have paid one instalment and rest have paid two instalments. While calculating moratorium numbers, Kumar had said on 5 June, if a borrower has paid two or more instalments, it is not considered a deferment.
Kumar said on Friday that in retail loans, it is definitely seeing borrowers hesitant to increase their liabilities and a large number of people are repaying.
“In the last four-five years, a lot of companies have deleveraged and the other ones have disappeared. For most of the banks, provision coverage ratios have gone up. So, the resilience in the financial system is much higher than it was four years ago," he said.
On the pandemic and its effect on the economy, Kumar said that the situation was very bad in April as that was the month that saw huge disruption to supply chains. After that things have gradually started picking up and May was better than April, he said.
“I can say that in June there was a sharp recovery. All the feedback that I get from the ground is that definitely in the rural area, the impact has been much less. For some states like Maharashtra, Tamil Nadu or industrially-advanced states, the impact of covid-19 is much severe," said Kumar.
According to Kumar, the outbreak of the covid-19 pandemic has created a massive economic crisis and it surpasses the one created by 2008 crisis.
“The virus has become the talk of the town everywhere and there is hardly anyone who can claim that he or she is nit impacted by the pandemic," he said, adding that while projections of the potential impact on the global economy vary widely, there is broad agreement that the economy will contract
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