In order to mitigate the impact of COVID-19, the RBI allowed lending institutions to grant a moratorium on payment of instalments of term loans due between March 1, 2020, and May 31, 2020, which was later extended till August 31, 2020
Supreme Court will be pronouncing judgement in loan moratorium case tomorrow, according to news agency ANI.
In order to mitigate the impact of COVID-19, the RBI allowed lending institutions to grant a moratorium on payment of instalments of term loans due between March 1, 2020, and May 31, 2020, which was later extended till August 31, 2020.
The central bank later permitted the lenders a one-time restructuring of loans without classifying them as non-performing assets to help companies and individuals manage the financial stress caused by coronavirus pandemic. Only those companies and individuals whose loans accounts are in default for not more than 30 days as on 1 March, 2020, are eligible for one-time restructuring. For corporate borrowers, banks can invoke a resolution plan till 31 December, 2020 and implement it till 30 June, 2021.
For personal loans, banks have an option to invoke the resolution plan till December 31,2020 and implement it within 90 days from the date of invocation. Accounts which are standard, but not in default for more than 30 days as on March 1,2020 will be eligible for restructuring.
According to a report by Mint, the Reserve Bank of India (RBI) is likely to reject banks’ request to extend interest-payment relief to working-capital borrowers, as it seeks to wind down some of the pandemic-era policies amid brighter prospects for the economy, three people aware of the matter said.
In a recent Baking report by RBI, the profitability of non-banking finance companies (NBFCs) may be 'dampened' going ahead due to the loan impairment and lower credit demand.
Due to loan moratorium and asset classification standstill, asset quality shored up. However, many NBFCs have made additional provisioning as per expected credit loss (ECL) norm; and bolstered their capital position by ploughing back dividends, RBI had recently said in its Report on Trend and Progress of Banking in India 2019-20.
Overall, the percentage of customers availing the moratorium has been relatively lower for NBFCs, while loans outstanding under moratorium were higher than those extended by scheduled commercial banks (SCBs) indicative of incipient stress, the report said.
As on August 31, 2020, around 26.6 per cent of the total customers of NBFCs availed moratorium and close to 44.9 per cent of their total loan outstanding was under moratorium, it said.
The consolidated balance sheet of NBFCs decelerated in 2019-20 due to stagnant growth in loans and advances beset with a challenging macroeconomic environment and weak demand compounded by risk aversion, the report said.
With inputs from agencies
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