The Centre is considering a request from bankers to extend the loan moratorium until the end of November, as there are no signs of a fast enough recovery in the first half of this fiscal year.
According to sources, some bankers believe that there may be a major spike in the non-performing asset (NPA) otherwise.
A senior official from the Finance Ministry said, “Some of the bankers have suggested that the period of moratorium should be extended till November since they do not see any sharp recovery in the September quarter. The (Finance) Ministry is examining the proposal.”
According to the announcement made before, the moratorium was to be for the period of March to May. But an extension until August 31 has been given.
A sharp rise in the number of bad loans is likely expected by bankers.
They feel that the only way out is extending the moratorium by another three months as there is no restructuring order so far from the central bank.
According to Soumya Kanti Ghosh, chief economic advisor to State Bank of India there is no official word on the worth of loans under the moratorium, the figure could be 35-40 per cent of the average portfolio.
According to Soumya Kanti Ghosh, chief economic advisor to State Bank of India “…the moratorium has prevented any loan-account from a downgrade and helped the banking industry in reining in fresh slippages. But the real picture will emerge after the September quarter.”
As per the internal assessment of the finance ministry, about Rs 40 lakh crore of credit is under moratorium.
Experts fear that even in the best situation, only seventy-five per cent of borrowers will be able to repay their loans by August 31. Given the pace of the economic revival, this would mean that loans worth Rs 10 lakh crore are under the risk of turning NPA.
Possible solutions include either extending the moratorium or a one-time restructuring of debt. “The ministry is aware of the problem faced by businesses and individuals.
Finance ministry officials said, “Negotiations with the RBI for a one-time restructuring is on. However, by the end of July, if there is a requirement, bankers have said there is a fair case for the extension.”