Tag: Moratorium

‘Customers are getting back on loan repayment track’

Banking & Finance

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Suryoday Small Finance Bank (SSFB) will step up focus on cost management, recovery and serving existing customers well amid the pandemic. Business growth will necessarily follow as a result of this, according to Baskar Babu R, MD & CEO.

In an interaction with BusinessLine, Babu said his bank continues to maintain substantially high liquidity and capital adequacy. So, it will be ready to accelerate lending when green shoots become visible. Excerpts

Do customers in the microfinance and small business loan segments continue to face strain in loan repayment?

As things open up, customers are coming back into the loan repayment track. So, in the current economic cycle, if a customer pays two out of every four instalments, he is considered a good customer. Among our delinquent customers in March 2021, about 76 per cent of them paid an instalment at least in one of the two months — February or March.

Moratorium did a very good thing for the customers as they did not feel that they were defaulting. And co-incidentally because of regulatory and government support, the credit flow continues to the microfinance segment.

In the small business segment, the bounce back usually is much swifter. They start putting their skills/competencies to work. For many such businesses, it is the time value of money

When do you expect lending operations to get normalised?

Given that we have come out of the pandemic, we were far more confident that we will be able to weather the second wave. As we started moving towards normalcy, about 80-85 per cent of the customers started displaying good (repayment) behaviour. We will have to go back to reconnect with the rest.

When it comes to lending a helping hand to customers facing incipient stress, the focus is to do restructuring in a meaningful manner for them to overcome the pain. This will reduce NPAs.

If a third wave does not hit us badly, it will be back to business as usual. We will get closer to normalcy by September.

Will you tweak the way you are doing business in the light of the experience gained from the pandemic?

When it comes to business model, the way in which we will tweak it will be in terms of enhancing our product lines as our customers graduate (from small ticket microfinance loans to bigger loans)…about 5-6 per cent of our total customer base of 1.5 million will be requiring a home loan in the next 12 months.

Given that people are increasingly dipping into their deposits to meet emergency health expenses, how will you ensure that deposits don’t haemorrhage?

Even low-income households are looking at health insurance as a key product. It is no more a product which has to be sold. People realise the importance of having a meaningful insurance cover.

We are planning to roll out a product for a particular savings account variant, whereby the customer will get a complimentary top-up insurance cover of up to ₹40 lakh in the first year….The middle class usually have a health insurance cover or can manage an expense of, say, ₹4-5 lakh. But when a large one-off expense arises, it becomes very difficult to manage. So, we are trying to work out a value-added product.

Two years back, we gave a sachet insurance product to our microfinance customers to cover the losses arising from natural calamities. For a ₹50 premium for two years, the product covered any damage to goods and property up to ₹50,000. We don’t get any commission for this. It is just an add-on product. The penetration is pretty good at about 70 per cent.

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Icra survey, BFSI News, ET BFSI

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Around 42 per cent of non-banking financial companies (NBFCs) expect a growth of more than 15 per cent in their asset under management (AUM) in fiscal 2021-22, says an Icra Ratings survey. The findings are based on a survey of 65 non-banks, constituting around 60 per cent of the industry AUM.

The agency conducted the survey to understand the impact of the second wave of COVID-19 on these entities and their expectations going forward.

It said NBFCs growth expectations have moderated vis-a-vis the expectations six months earlier. This follows the possible impact of Covid 2.0 on business in Q1 FY2022.

“While 42 per cent of the issuers (NBFCs by number) are expecting a more than 15 per cent growth in AUM in FY2022, the proportion based on AUM weights is much lower at 8 per cent, indicating that larger players in the segment expect a relatively moderate growth in FY2022,” the agency’s Vice President (Financial Sector Ratings) Manushree Saggar said.

With most of the lenders (74 per cent in AUM terms) indicating an up to 10 per cent AUM growth, the agency expects the growth for the overall industry to be about 7-9 per cent for FY2022.

Within the non-bank finance sector, segments like MFIs, SME-focussed NBFCs and affordable housing finance would continue to record much higher growth than the overall industry averages, supported by good demand and lower base, she said.

The survey said with gradual easing of lockdowns and moderation in fresh cases of Covid and with increased vaccination coverage, the lenders are optimistic on growth pick-up in balance part of FY2022 and expect it to be higher than the growth seen in FY2021.

However, the non-bank finance companies are expecting the asset quality related pain to persist in the current fiscal as well, it showed.

“Overall, 87 per cent of issuers (by AUM) expect reported gross stage 3/ NPAs to be either same or higher than March 2021 levels, which in turn will keep the credit costs elevated,” it said.

Over 90 per cent of lenders (by AUM) expects the credit costs to remain stable or increase further over FY2021 levels.

On the restructuring front, while lenders are expecting marginally higher numbers as compared to the last fiscal, the overall numbers are expected to be low, the agency said.

Saggar said with no blanket moratorium and reflecting the stress on the cash flows of the underlying borrowers, mid-sized lenders (AUM between Rs 5,000-Rs 20,000 crore) are expecting a higher share of restructuring under Restructuring 2.0.

“Overall, the restructured book of non-bank finance entities is expected to double to 3.1-3.3 per cent in March 2022 from 1.6 per cent in March 2021,” Saggar added.

The agency said a significantly higher number of issuers (56 per cent) are expecting to raise capital in FY2022 as compared to the earlier survey, wherein only 28 per cent of the issuers were expected capital raise in FY2022.

It expects the pre-tax profitability for non-bank finance companies in FY2022 would remain similar to the last fiscal which was around 30 per cent lower than the pre-Covid levels.



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RBI warns of stress build-up in consumer credit, BFSI News, ET BFSI

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The pandemic and its fallout on the economy has made consumer lending riskier for banks even as it has been the only sector to help banks keep their loan books afloat at such times.

The delinquency rates for such loans are going up particularly for private sector banks and NBFCs during the pandemic warned the Reserve Bank of India‘s latest financial stability report. At the same time the second wave has also affected demand for such loans with a steep fall in demand in April , it said.

The Reserve Bank’s latest Financial Stability Report notes that the delinquency rates for consumer credit in private sector banks doubled from 1.2 per cent in January 2020 to 2.4 per cent in January 2021. While for NBFCs it went up from 5.3 per cent to 6.7 per cent in the same period. Overall consumer credit deteriorated after the loan moratorium programme came to an end in September 2020.

“While banks and other financial institutions have resilient capital and liquidity buffers, and balance sheet stress remains moderate in spite of the pandemic, close monitoring of MSME and retail credit portfolios is warranted.” the report said.

Consumer credit includes home loans, loans against property, auto loans, two-wheeler loans, commercial vehicle loans, construction equipment loans, personal loans, credit cards, business loans, consumer durable loans, education loans and gold loans.

The overall demand for consumer credit in terms of inquiries had stabilised in Q4’2020-21 after a sharp rebound during the festive season in Q3’2020-21 after the first COVID-19 wave receded. But the second wave, however, has sharply affected credit demand, with a steep fall in inquiries across product categories in April 2021. Growth in credit-active consumers- consumers with at least one outstanding credit account- and, outstanding balances, however, remains sluggish compared to the previous comparable period. For unsecured loans, the fastest-growing category in this segment, for example, fell from 39.4 per cent in January’20 to 6.5 per cent in FY’21. For home, which accounts for a major chunk of this segment, the growth rate of credit-active consumers slowed from 12.03 per cent to 0.3 per cent during the period.

On a positive note, loan inquiries are more from better-rated borrowers. “Loan approval rates remain healthy as the risk tier composition of inquiries shows a distinct tilt towards better-rated customers.” the central bank‘s report said.



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Kerala government seeks moratorium on repayment of loans, BFSI News, ET BFSI

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The Kerala government has approached the Centre to put in place a moratorium on repayment of loans till December 31 in order to provide relief to individuals in the unorganised sector, MSMEs, agriculture and others adversely affected by COVID-19 pandemic and the subsequent lockdown.

Kerala has sought a moratorium of loans without accrual of interest and penal interest during the moratorium period.

Kerala Finance Minister K N Balagopal, in a letter to Union Finance Minister Nirmala Sitharaman, said the impact of the second wave induced lockdown has adversely affected the economic and social well-being of all sectors of the society.

“…it is felt that the burden of repayment of the loans taken by individuals, especially those in the unorganised sector, MSMEs and agriculturalists is particularly onerous at this time, and these sections need some relief by way of moratorium on the repayment of loans at least till December 31, 2021,” Balagopal said in a letter dated June 16.

He said the state government has taken all steps to ameliorate the hardships faced by the people, especially the vulnerable sections.

“I request your kind intervention to put in place a moratorium on repayment of loans at least till December 31, 2021 without accrual of interest and penal interest during the moratorium period,” he said in the letter.

The Finance Minister pointed out that the economy of Kerala has been under considerable stress since 2018 due to successive natural disasters including the massive floods which lashed the state wreaking havoc in most of the districts.

The outbreak of COVID-19 in early 2020 further exacerbated the stress on the economy, he added.



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Kerala Financial Corp declares moratorium on MSME loans

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Kerala Financial Corporation, a leading State Finance Corporation, has announced a one-year moratorium on principal to MSME enterprises and a proposal to restructure their loans as per Reserve Bank of India (RBI) guidelines to prevent such accounts from being categorised as non-performing assets.

The scheme is available to loans in the Standard Category till March 31, 2021, on the basis of applications from promoters received until September 30, 2021. No charges or additional interest will be charged for this facility, a spokesman for the financial institution said.

Also read: RBI allows lenders to revamp MSME accounts under Covid-19 related stress

Last year, the Corporation had sanctioned 20 per cent additional loan to customers whose repayments were prompt until March 31, 2020. The second wave of Covid-19 has once again affected the tourism sector and small industries. This has prompted it to offer another scheme for entrepreneurs in these sectors.

Additional loans, top-ups announced

They will be allowed an additional 20 per-cent top-up to their loan in addition to the 20 per cent provided last year, taking the lot cumulatively to 40 per cent, the spokesman said. The scheme has been formulated in line with the Emergency Credit Line Guarantee Scheme (ECLGS) offered by the Centre.

Loans by banks under the ECLGS are guaranteed by the National Credit Guarantee Trust Company. But this is not available to KFC, which has therefore formulated a scheme with more benefits for customers. So, while banks lend only 20 per cent of the outstanding balance in the customer’s account, the State financial corporation lends up to 20 per cent of the disbursed amount, thereby offering a higher amount.

Furthermore, while the Central scheme provides loans only to the tourism sector, Kerala Financial Corporation also includes small enterprises and the healthcare sector under the scheme. It also allows a 24-month moratorium on principal repayment. Since interest is payable during this period as well, customers will have the option of adjusting it against the loan.

The State Finance Minister had announced in the Budget 2021-22 that assistance would be provided to entities manufacturing products helping prevent the spread of Covid-19. Kerala Financial Corporation has come up with a new plan for such ventures, the spokesman said.

Assistance to fight Covid-19 spread

The scheme will be available to all sectors involved in Covid-19 prevention in the field of healthcare ranging from hospitals, laboratories, units involved in oxygen storage and distribution, manufacturing of ventilators, oxymeters, and other life-saving equipment.

Loans up to ₹50 lakh will be covered under the Chief Minister’s Entrepreneurship Scheme at seven per cent with a tenure of five years. For loans above ₹50 lakh, the interest rate will be seven per cent up to ₹50 lakh and interest for the remaining portion will be fixed as per the rating of the entity. Repayment period available is up to 10 years. Up to 90 per cent of the total project cost will be financed under the scheme.

Interest rates slashed

Kerala Financial Corporation has slashed interest rates for loans to healthcare, tourism and MSME sectors with the minimum rate being reduced from 9.5 per cent to eight per cent. The higher-interest rate slab has been reduced to 10.5 per cent from 12 per cent. Interest rates are determined on the basis of the rating of the entity.

The lower interest rate is usually applied from the loan reset date (month of borrowing) of the respective enterprise. But it has been decided that on this occasion, the benefit of lower interest rate will be available to all eligible customers from July 1, 2021.

The Finance minister had also announced that the loan assets of the company would be increased from ₹4,700 crore to ₹10,000 crore in five years and that ₹4,500 crore will be sanctioned during this financial year.

The value of secured assets will be determined as per market value fixed by external valuers in line with the practice of most banks. The sanctioning power of district managers has been enhanced from ₹50 lakh to ₹2 crore. A special cell will be set up at the head office to expedite the approval and disbursement of loans to small entrepreneurs and startups.

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‘Phone pe loan’ bringing credit revolution to hinterland India, BFSI News, ET BFSI

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Banks and NBFCs have struck gold in digital lending, which is driving huge volumes through small loans.

Loans of below Rs 25,000 have grown 23 times since 2017, according to a joint report by Transunion CIBIL and Google.

The report identifies the significance of small ticket less than or equal to Rs 25,000 loans, characterized by searches for “phone on loan”, “laptop on EMI“, and “mahila loan 30,000”.

The share of these loan disbursals amongst all personal loans has gone up from 10 per cent in 2017 to 60 per cent in 2020.

With disbursal speed and convenience being the hallmarks of these loans, the digital-first sellers have the largest share in this category with 97 per cent of all personal loans disbursed by them being under Rs 25,000.

According to TU Cibil in 2020, 38% of loans disbursed to the ‘prime’ credit tier was through fintech NBFCs (non-banking financial companies).

The data shows that those who avail small loans are not less creditworthy.

Additionally, these fintech NBFCs no longer have only ‘urban youth’ as their primary audience — 70% of disbursals are outside tier-1, with 78% of customers being millennials (between 25-45 years of age).

The shift is set to accelerate as reflected by online trends which show that searches outside cities are growing 2.5 times faster as compared to cities.

Searches for loans grew the most in tier-3 cities at 47%, followed by tier-2 (32%) and tier-4 (28%). Indian credit industry stood at $613 billion (Rs 44 lakh crore), which reflects an 18% compounded annual growth rate (CAGR) since 2017. While home loans at $290 billion (Rs 21 lakh crore) form the largest chunk, loan against property and business loans are growing the fastest.

Who is the new borrower?

In 2020, 49 per cent of first-time borrowers were less than 30 years old and 71 per cent were based in non-metro locations, while 24 per cent were women, according to a joint report by Transunion CIBIL and Google titled “Credit Distributed”.

Further, these profiles vary when analyzed at credit product level based on credit appetite, credit experience, credit discipline, and channel of consumption, and have made segmentation increasingly nuanced and complex.

Overall, growth in searches for car loans between the two halves of 2020 grew the fastest at 55 per cent with home loans following with 22 per cent growth.

Loyalty factor pays for fintech NBFCs

Small loan borrowers demonstrate higher loyalty with 42X growth in repeat customer base amongst lenders in CY 2020 versus CY 2017. Moreover, this growth is as high as 64X for digital-first lenders i.e FinTech NBFCs indicating higher stickiness driven by convenience, over the same time period.

Ticket sizes on loan products like personal loans, auto loans and consumer durable loans are geo-agnostic.

In line with the geographical expansion of new digital users in tier 2/3/4 locations and rural India, and a preference for the mother tongue, local language searches for credit showed an exponential increase. Searches in local languages and for translations of terms such as ‘Credit’, ‘Term loan’, and ‘Moratorium‘ have also witnessed an uptick.

Customers rate trust in the brand higher than other traditional parameters like low interest rates, which came second, before recommendations, disbursal time, and online process, all considered to drive value perception with customers.

Sixty-four per cent of credit buyers say that brand is a major factor in choosing their loan provider. Considerable time and effort goes into choosing the lender brand with 76 per cent of borrowers taking a minimum of two weeks between exploration and finally choosing the lender.

Almost a third (32 per cent) of borrowers consider over five providers before proceeding to apply.



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We are well prepared compared to the first wave: South Indian Bank CEO

Banking & Finance

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The Thrissur-based South Indian Bank is looking at a credit growth of about 10 per cent in FY22, assuming the economy revives in the second half of the current fiscal. We have laid down plans for the growth of about 18-20 per cent in the coming years, says Murali Ramakrishnan, Managing Director and CEO. We are continuously monitoring the impact of Covid and recovery of the economy and will keep on calibrating our growth plans accordingly, he adds. Excerpts:

What are the plans for the current fiscal year?

It is the decision of the bank to rejig the existing portfolio, with the focus to diversify the risk both in assets and liabilities. We are replacing the bulk deposit with retail deposit and the lumpy corporate exposures with diversified retail exposures.

The bank has been following a branch structure where asset and liability business were managed by branches. To facilitate this, we had a closer look at the structure of the bank. Post our assessment, a dedicated vertical asset structure was formed for all retail assets in businesses, in which the branches would act as one more channel for sourcing new leads from the existing customers and walk-in potential customers.

Similarly, MSME and the corporate banking vertical has been formed with a dedicated sales structure across the country.

I am happy to share that the new vertical structure is in place with dedicated teams. Wherever we felt that the internal talents are not available, especially in the retail asset vertical, we have recruited a few experts laterally to drive those businesses.

Apart from this, we have set up a separate data science division tohelp us do analytics in the area of assets, liability, collection. We have also set up separate operations divisions to take care of back-end fulfillment of asset and liabilities transactions.

What would be the impact of Covid-19 on the business?

Compared to the first wave we are well prepared, and the government has also not resorted to the complete lockdown. Also, we now have vaccines. We are closely assessing the impact of the second wave on our borrowers and wherever we feel there is a genuine need, we are extending full support with restructuring as per regulation.

We had extended moratorium benefits to all borrowers, in line with other banks. We were witnessing improvement in business activities till March, which was impacted by the second wave.

What has been its impact on NRI remittances?

Owing to the pandemic, most people, including NRIs, keep a buffer in their bank accounts for emergencies. Further, there are several restrictions placed in many countries, which have resulted in increased remittances for meeting the financial needs back at home.

South Indian Bank posts net profit of nearly ₹7 crore in Q4

The rupee had appreciated against the dollar in FY21, which has led to an increase in remittances. Overall, we experience moderate growth in remittances during FY21.

Can you specify your plans in raising equity capital?

As part of the Vision 2024 strategy, the bank has worked out the equity capital requirement, based on the business projections for the next three years. The recent equity capital raising of ₹240 crore through marquee domestic institutional investors was in line with our stated strategy.

The envisaged equity capital will be used to strengthen the balance sheet and build a buffer against the pandemic. We intend to raise the balance tranche of equity capital of ₹510 crore by December 2021.

The bank’s share price is low, which is not giving much gain to investors. Will they reflect deeper troubles?

We are completely cognizant of the pain our existing loyal investors have suffered over the past few years in terms of subdued share price performance. However, with key initiatives by new management, the market has appreciated the efforts, which are reflected in the share price performance of the bank in the last six months.

South Indian Bank mulls multi-pronged approach to return to profitability

We are happy to say that even after fresh equity capital, our overall market capitalisation has improved without an impact of revised valuation multiple. Further, given the revised book value of ₹27.7 per share against the market price of about ₹10, we believe there is inherent value in the stock and it deserves timely appreciation.

How are you preparing to tackle the Covid-19 virus? Are your employees fully vaccinated?

With the outbreak of the pandemic, the bank had, from the beginning of the calendar year 2020, initiated several proactive measures to safeguard the safety and security of employees. Through periodic instructions and continuous monitoring, it was ensured that all offices of the bank funtion strictly following Covid protocols.

The bank has initiated a few new employee benefits such as medical insurance for treatment of Covid and life insurance in the unfortunate event of the death of an employee. Further, the bank will be reimbursing the vaccination cost for all employees and their dependent family members.

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Multiple contempt petitions filed in SC against Shaktikanta Das, bank forum chief, others, BFSI News, ET BFSI

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A number of petitions have been filed before the Supreme Court seeking to initiate contempt of court proceedings against Reserve Bank of India (RBI) Governor, Shaktikant Das, Chief Executive of Indian Banks Association (IBA) and others for allegedly flouting the SC’s earlier order, by turning and declaring the account of the petitioners as Non Performing Assets (NPA) in connection with the moratorium matter.

The petitioners – M/s Azeez Trading Company, Umrazz Trading Corporation, Ajay Hotel and Restaurant, Latur, Maharashtra — have filed their plea through lawyer Vishal Tiwari and Advocate On Record (AOR) Abhigya.

The respondents, Reserve Bank of India (RBI) Governor, Shaktikant Das, Chief Executive of Indian Banks Association (IBA) were duty-bound to promulgate and ensure the compliance of the order of this court throughout the country but they deliberately didn’t, the petition said.

The Supreme Court’s order, dated September 3, 2020, was operational on all lending institutions/banks throughout the country and was passed in favour of all borrowers accounts to grant relief from financial stress during the COVID-19 pandemic, Tiwari said in the petition.

The September 3 order was passed in the presence of the respondents represented by their counsel and all were very well aware of the Stay order, the petition said.

It further claimed that the contemptuous act of the respondents had not only disobeyed the court’s order but also caused severe irreparable damage and loss to the petitioners.

“The petitioners have lost their image and has been defamed as the possession notice was published in the new papers of his locality which made the dignity of the petitioner lower,” it added

The contemptuous act of all the respondents has shaken the confidence of the public and has degraded the trust of the borrowers. In this Covid-19 pandemic where all borrowers are passing through the worst scenario and financial stress, the respondents’ alleged act is very disgraceful and contemptuous. The petitioners thereby sought the issuance of notice to the alleged contemnors for willfully violating the order/directions of the Apex Court passed in a writ petition.

“Punish the contemnors for having committed contempt of this Court,” the petition said.

Further, in the petition, Tiwari said that the stay order was passed in the pandemic COVID-19 for the benefit of stressed borrowers so that they shall not suffer in present financial crisis during the pandemic.

“There is already a slump in the work of the petitioner. The stay order was operating as a lifesaving drug but the contemptuous act of the respondent has brought a major setback to the petitioner and his survival has become critical,” the petition said.

Several petitions have already been filed in the same case before the Supreme Court.



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Banks likely to transfer about 80 large NPA accounts to NARCL, BFSI News, ET BFSI

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Banks are likely to transfer about 80 large NPA accounts for the resolution to National Asset Reconstruction Company Ltd (NARCL), which is expected to be operational by next month.

NARCL is the name coined for the bad bank announced in the Budget 2021-22. A bad bank refers to a financial institution that takes over the bad assets of lenders and undertakes resolution.

The size of each of these NPAs accounts is over Rs 500 crore and the banks have identified about 70-80 such accounts to be transferred to the proposed bad bank, sources said.

It is expected that NPAs over Rs 2 lakh crore will move out of the books of the banks to the bad bank, they added.

The company will pick up those assets that are 100 per cent provided for by the lenders.

Finance Minister Nirmala Sitharaman in the Budget 2021-22 announced that the high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books.

“An Asset Reconstruction Company Limited and Asset Management Company would be set up to consolidate and take over the existing stressed debt,” she had said in the Budget speech.

It will then manage and dispose of the assets to alternate investment funds and other potential investors for eventual value realisation, she added.

Last year, the Indian Banks’ Association (IBA) had made a proposal for the creation of a bad bank for swift resolution of non-performing assets (NPAs). The government accepted the proposal and decided to go for asset reconstruction company (ARC) and asset management company (AMC) model for this.

NARCL will pay up to 15 per cent of the agreed value for the loans in cash and the remaining 85 per cent would be government-guaranteed security receipts.

The government guarantee would be invoked if there is a loss against the threshold value.

The Reserve Bank of India (RBI) has said that loans classified as fraud cannot be sold to NARCL. As per the annual report of the RBI, about 1.9 lakh crore of loans have been classified as fraud as of March 2020.

To facilitate the smooth functioning of asset reconstruction companies, the RBI last month decided to set up a panel to undertake a comprehensive review of the working of such institutions.

After enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 2002, regulatory guidelines for ARCs were issued in 2003 to enable the development of this sector and to facilitate the smooth functioning of these companies.

Since then, while ARCs have grown in number and size, their potential for resolving stressed assets is yet to be realised fully.



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Loan restructuring: FIDC seeks clarity from RBI on relief measures

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The Finance Industry Development Council (FIDC) has written to Reserve Bank of India Governor Shaktikanta Das seeking more clarity and highlighting residual issues in the NBFC sector after the announcement of relief measures for loan restructuring on May 5.

“To clarify or permit restructuring of such MSME accounts, which had been restructured under Restructuring Framework 1.0 and increasing the period of moratorium and/or extending the residual tenor up to a total of two years for MSMEs, along the same lines as the support provided to individuals and small businesses,” said the representation by FIDC, which is the representative body of assets and loan financing companies.

It has also sought inclusion of hybrid use of tractors under the definition of small businesses, thereby allowing restructuring of such mixed-use tractor (equipment) loans.

Moratorium

FIDC has asked for allowing moratorium up to an additional three years, taking both Resolution Framework 1.0 and 2.0 together, for long tenure loans (loans with a residual tenure of at least five years), over and above the period of two years.

“For loans with residual tenure of up to five years: increase the overall moratorium period by additional one year, that is overall cap of three years,” said FIDC, adding that for loans with residual tenure between five years and 10 years, the overall moratorium period should be increased by an additional two years to an overall cap of four years.

Similarly, for loans with residual tenure of over 10 years, the overall moratorium period should be increased by an additional three years to an overall cap of five years.

“It is our earnest request that on the lines of MSMEs, the individuals and small businesses, who are impacted by Covid-19, should also be allowed upgrade even if they slipped into NPA category between April 1, and the date of implementation,” said FIDC, requesting that the RBI should issue an amendment or clarification on the matter.

Given the State-level lockdowns and restrictions in movement, FIDC has also suggested permitting digital delivery of documentation. “Customers be allowed to request and invoke restructuring through video, email, SMS or WhatsApp and restructuring documentation may be allowed to be signed digitally either via e-Sign or through click-wrap method,” it has said in the recommendation.

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