Banks may not extend second moratorium to all their customers amid gradual resumption in business activity and rising asset quality risk emerging from longer duration loan forbearance.
Sources said that banks are evaluating their loan portfolio with regard to customers who availed moratorium of interest repayment during the fist instalment period of March 1 to May 31. Fresh extension on moratorium will be offered only to certain clients with good track record and healthy business operations.
"Unlike the first round, banks will now be extending the moratorium selectively (1m-3m) basis to new/old customers, while good customers too will be reluctant, given the higher interest cost and some pick-up in business activity," said Emkay Global in a report prepared after talking to several bankers on the fresh announcements by the Reserve Bank of India (RBI).
As part of COVID-19 relief package, the RBI on Friday extended the moratorium on term loans and interest on working capital loans by three months till August 31. Also, as a relief for working capital borrowers, it allowed conversion of accumulated interest on these loans to Funded-Interest Term Loan (as typically happens under restructuring) instead of one-shot payment at the end of the moratorium, but still payable before March 31, 2021.
Bankers are indicating that instead of the 3 month moratorium, forbearance on asset classification or selective restructuring (mainly for SME) would have been a better solution, with business activities resuming gradually. Longer moratoriums are acceptable for long-tenure loans like mortgage, but not for short-tenure loans, and also disrupts credit discipline even for relatively good customers in the long run, the brokerage said in its report on the basis of comments from bankers.
It is now expected that that salaried class, which was relatively reluctant in the first round, may opt for a moratorium in the second round due to rising job losses/pay cuts.
Moratorium behaviour from corporates was mixed in the first round, with even good rated corporates availing moratorium, but may not take the extension.
Collection from micro finance segment borrowers still remains slow due to restriction in conducting centre meetings and thus, banks may selectively extend a short moratorium on need basis in specific areas, the brokerage said.