The chairman of India’s largest lender State Bank of India on Friday tamped down rising expectations of another round of loan repayment moratoriums, saying a blanket extension of the deferment benefit is not required after 31 August.
The central bank in May had announced a three-month extension of the loan moratorium to 31 August. The covid-19 pandemic and the ensuing lockdown from 25 March had led to a near-halt of economic activities, rendering people jobless and affecting their repayment capabilities.
Speaking through a video-conference at the 7th SBI Banking and Economics Conclave, Rajnish Kumar said that while it was too early to say if there will be another extension, the Reserve Bank of India (RBI) will have data from all lenders before taking a 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 of 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, 900,000 have not paid any instalment, 700,000 have paid one instalment and the rest have paid two instalments. While calculating the moratorium numbers, Kumar had said on 5 June, if a borrower has paid two or more instalments, it was 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 others 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 things have started picking up since the huge disruption to supply chains in April.
“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 such as Maharashtra and Tamil Nadu, or industrially-advanced states, the impact of covid-19 is much severe,” said Kumar.
According to Kumar, the economic crisis created by the coronavirus pandemic surpasses the 2008 financial crisis.
“The virus has become the talk of the town everywhere and there is hardly anyone who can claim that he or she is not 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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