RBI extends loan repayment moratorium by 3 months

Darnell Taylor
May 22, 2020

"In view of the extension of the lockdown and continuing disruptions on account of COVID-19, it has been chose to permit lending institutions to extend the moratorium on term loan instalments by another three months, i.e., from June 1, 2020 to August 31, 2020".

Apart from this, the repayment schedule and all subsequent due dates, as also the tenure for such loans, were shifted across the board by three months. The EMI payments will restart only once the moratorium time period expires on August 31.

The bank already had reduced the interest rate to 4.4% from 5.15% in March to ease financing troubles caused by the coronavirus outbreak. "Elevated level of inflation in pulses worrisome, requires review of import duties", he said.

Speaking about the food inflation, the RBI governor said that the food inflation which had eased from the January peak in February and March has now surged to 8.6 per cent in April.

Das said that soft global prices of metals and other industrial raw materials are likely to keep input costs low for domestic firms.

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Shaktikanta Das also said that the inflation outlook is highly uncertain.

Shaktikanta Das echoed the views of several global research reports that estimated a negative growth in India's GDP. "Much will depend on how quickly the COVID curve flattens and begins to moderate", the RBI governor stated. These relaxations to states will release an additional amount of about Rs 13,300 crore. The central bank set the 25 percent limit in June 2019 and capped lenders' exposure to a single party at 20 percent. However, agri sector remained the ray of hope, Das said.

He said economic activity in India was severely impacted by the nationwide lockdown in the last two months. He added that an extension of 3 months will be given to meet 75 percent utilisation of investment limits. This makes it a six month moratorium. "The impact on the banking sector will be negative". He said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if need arises.

This, the Governor attributed to current global demand-supply balance, low worldwide crude oil prices, soft global prices of metals and other industrial raw materials, which are likely to keep input costs low for domestic firms, deficient demand and volatility in financial markets.

"The off-cycle move may have caught the markets off-guard, but it shouldn't be a total surprise given recent dismal activity indicators", said Prakash Sakpal, an economist at ING Groep NV in Singapore.

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