Across-The-Board Moratorium Not Needed Beyond August 31: SBI Chairman
An across-the-board extension of the moratorium on loan repayment may not be required beyond August 31, State Bank of India Chairman Rajnish Kumar said on Friday. He, however, said there are certain sectors that still need support and the Reserve Bank of India will take a calibrated approach.
In March, the RBI had announced a three-month moratorium on repayment of all term loans, which, in May, was extended by another three months till August 31.
Speaking at the 7th SBI Banking and Economic Conclave, Kumar said it is very premature to say if there will be another extension of the moratorium, the RBI will have data from the system and would take an appropriate call.
But if you ask me, an across-the-board moratorium is not required anymore. However, certain sectors may need some relief and that is where, based on the data available with RBI, there will be a calibrated response, Kumar said.
He believes certain sectors such as aviation, tourism, hotel, gems and jewellery may need support. For SBI, the percentage of borrowers who have availed of the moratorium is not high, he said. During the fourth quarter results, Kumar had said close to 21% of the bank's retail borrowers have availed the three-month moratorium.
Talking about asset quality going ahead, Kumar said it is very difficult to say anything at this stage. "Looking only at the data of SBI for the moratorium, it seems to be a very manageable situation. What I am finding is that people are very cautious about increasing their liability, he said. Retail borrowers are hesitant to increase their liability and they have been repaying. Even corporate borrowers who have opted for moratorium, their intention is only to preserve cash, he said.
In today’s scenario when the real economy is having trouble, as a banker, I don’t want to sound to be very optimistic on the NPA front but analysis of our book, which we are doing continuously, I not over worried,”Rajnish Kumar, Chairman, SBI
According to Kumar, the six-month moratorium on repayment of loans is equivalent to restructuring. "Six months moratorium is itself a restructuring because the payment which were due in the six months particularly for the EMIs or the term loan obligations have all been back ended. So in a way, it is a mini restructuring across the board," he said.
Speaking about the impact of Covid-19 on the economy, he said the pandemic has created a massive economic crisis and it surpasses the one created by the 2008 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. Definitely rural areas have been less affected but for industrially advanced states such as Maharashtra and Tamil Nadu the impact of Covid-19 is much severe.
Kumar said the situation in April was bad but things started picking up gradually in May. "June, I can say, there is a smart recovery," he said.
He said the country needs to spend more on infrastructure as it can create a lot of jobs and demand.
Investment in certain key sectors, infrastructure being one of them, can help in reviving the economy in a big way. This is where the government’s intervention becomes very necessary.Rajnish Kumar, Chairman, SBI
Kumar said lowering of interest rate will not lead to investments. "Interest rate is only one factor (for attracting investments). You make it (interest rate) zero and you expect investment will pick up - that will not happen," he said.
He said private capital can come in only when the investor is assured of a return and no hassles.